A Computational Approach to Exchange Rate Policy : Currency Basket Pegging and Its Impact on Iraq’s Productive Sector

Abstract

The Iraqi economy faces persistent structural challenges due to its heavy dependence on oil revenues, which account for the majority of public income and limit the development of productive sectors such as industry and agriculture. This study examines the potential of adopting a currency basket peg as an alternative exchange rate policy to enhance monetary stability and support the growth of the real economy. The research analyzes the relationship between exchange rate movements and the performance of productive sectors, highlighting how reliance on a single foreign currency increases vulnerability to external shocks. A conceptual framework is proposed to support the management of a currency basket based on trade patterns and economic indicators. The findings suggest that a diversified exchange rate regime could improve competitiveness, reduce import dependence, and contribute to long-term economic stability. The study concludes that adopting a more flexible and diversified monetary policy may play a significant role in strengthening Iraq’s productive capacity and achieving sustainable economic development.