Evaluating the record of the coalition provisional authority's macroeconomic reforms in Iraq

Abstract

This thesis measured three aspects of the Coalition Provisional Authority's macroeconomic reforms for transitioning Postwar Iraq; the degree of Central Bank independence; the success of the currency exchange; and whether the program of shock therapy weakened macroeconomic reforms. The premise behind implementing liberal economic reforms in Iraq was that creating a market-oriented economy would increase internal stability and would integrate Iraq into the global economy. Moreover, an integrated Iraqi government would be less likely to engage in hostile action against its own population or its neighbors. This thesis scored the actual degree of Central Bank independence at .64 according to the most widely accepted measure established by Cukierman, Webb, and Neyapti. This thesis also proved the CBI effectiveness at targeting inflation, which is another indicator of central bank independence. The CPA's program of dinar consolidation unified Iraq's dual monetary system and helped erase Saddam's legacy of economic incompetence. The goal of shock therapy was to avoid the obstruction and interference that might have accompanied a protracted step-by-step approach. Rather than being rejected by a popular backlash or overturned by the Iraqi government, the CPS's macroeconomic reforms remain vital. Although these reforms did not resolve all the structural hurdles in the economy, this research finds that the CPA's neoliberal economic policies have created the necessary groundwork for the further development of independent macroeconomic institutions.