OIL PRICE VOLATILITY AND ITS EFFECT ON INFLATION IN THE IRAQI ECONOMY: EMPIRICAL EVIDENCE

The present study aims to investigate the complex relationship between the oil price volatility and inflation in the economy of Iraq, focusing on the empirical evidence. The research hypothesis states that in the case of Iraq as an oil-dependent country, high oil price volatility is strongly associated with the significant increase in the inflation rate. Quantitative research is the methodology of inquiry, relying on the secondary data from the World Bank and the Central Bank of Iraq. The study applies multiple sophisticated econometric techniques, such as Regression Analysis, Vector Autoregression, Cointegration, and Error Correction Model, along with Generalized Autoregressive Conditional Heteroscedasticity models. The results reveal a high, statistically significant association between the oil price volatility and inflation rate fluctuations. In particular, the GARCH model results demonstrate how oil price variance also influences the variance of the inflation rate. The study argues that well-developed fiscal policies along with economic diversification are not only beneficial but essential to ameliorating the oil. The practical implications are important, as they refer to the strong need for a solid fiscal stabilization fund and serious efforts for economic diversification to withstand the oil market shocks occurrence. Further research should focus on the specific fiscal policies, explore the intimately related macroeconomic indicators, and extend the same analysis to the peer countries Keywords: Oil Price, Volatility, Inflation, Iraqi Economy, Economic Impact