IS THE CURRENCY AUCTION AT GATEWAY TO

CORRUPTION IN IRAQ?

Abstract

Corruption is an economic phenomenon that has implications for both developed and
developing countries, especially those in difficult circumstances. Iraq is in the top list of the most
corrupt countries. Therefore, investigating the causes of corruption and combating it, is the
objective for all decision-makers in this country. This study aims to present an equilibrium
relationship between the currency auction and corruption in Iraq for the period (2004-2018) in
the short and long run. To achieve this objective, Co-integration and VECM methods were used.
The results indicate that the currency auction is a gateway to corruption where the currency
auction explains almost half of the changes in the corruption, and there is an equilibrium
relationship between these variables in the long run. Accordingly, currency auction should be
eliminated and be used only in exceptional cases. It is necessary to coordinate between economic
policies to develop a strategy of action by the Central Bank in the future to achieve the economic
objectives and to establish a sophisticated banking system like in other developed countries.