Iraqi Dinar Discussion Board

[Aerospace]

Redenomination study conclusions.

These are the conclusions of a study of lops. It's done by a educated economist... not a crazed dinar pumper.

These are the hypotheses of the UNC study.

http://www.unc.edu/~lmosley/APSA%202005.pdf

Hypothesis 1: Both authoritarian and democratic governments may have political reasons for redenomination. Democratic governments are likely to redenominate in response to high inflation. Authoritarian governments may redenominate even without high inflation, particularly in the presence of civil conflict.
Indeed, Mas (1995) suggests that authoritarian governments will choose confiscatory currency reform rather than direct inflation as a strategy of financing.
Iraq is trying to be a democracy and they are redenominating in a response to the high inflation, even hyperinflation, of the 80's and 90's.

Hypothesis 2: Redenomination is more likely following a period of high inflation and a subsequent stabilization. A dramatic downward movement in inflation increases the probability of a redenomination. This is particularly likely in countries that are more open to international capital flows, that are under an IMF adjustment program, and that have politically independent central banks.
That one describes Iraq perfectly

Hypothesis 3: Redenomination is more likely immediately after an election (or with many years remaining until the next election), less likely immediately before an election, and more likely in more fractionalized political systems.
Iraq is about to conduct elections.

Hypothesis 4: Redenomination is less likely, all else equal, when left-leaning parties are in office, and more likely when right-leaning politicians hold office.
are they left or right, not sure... probably not a huge factor

Hypothesis 5: Redenomination is more likely in nations where it has been used in the past. The total past experience with redenomination increases the hazard of its use.
Don't think Iraq has done it in the past, but certainly dosn't mean they wont

Hypothesis 6: Redenomination is more likely, all else equal, where foreign currency substitution is more prevalent in the domestic economy. This is more likely in nations with high inflation, with high local currency/dollar ratios; and foreign currency substitution is more likely after 1989 (as financial globalization expands) than before.
That sounds like Iraq

Hypothesis 7: Redenomination is a more likely response to economic problems in more heterogeneous societies, and in younger nation-states.
Iraq certainly is a "younger nation-state"

So of the 7 conclusions of the lop study done by someone with REAL qualifications... Iraq fits perfectly in 5 of the 7 Hypothesis.