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Containing inflation has turned out to be one of the most challenging aspects of economic management in Iraq. This paper posits that conventional as well as unconventional factors explain inflation dynamics in the recent past. We build a theoretical model based on the insights into the workings of socialist economies under supply shortages provided by Shleifer and Vishny (1992) to help explain price dynamics. In the model, strategic behavior of the fuel distribution monopolist results in fuel shortages, with implications for fuel and non-fuel inflation. A number of step-wise adjustments of administered prices for fuel products since December 2005 offer an interesting experiment to help study this behavior. Our findings show that inflation may have been influenced by shortages in fuel and non-fuel commodity supplies, which themselves are driven by violence and rent-seeking.

Inflation (Finance) --- Iraq --- Economic conditions --- Finance --- Natural rate of unemployment --- Irak --- Rāfidayn, Bilād --- Bilād al-Rāfidayn --- Republic of Iraq --- Jumhuriyah al Iraqiyah --- Inflation --- Macroeconomics --- Price Level --- Deflation --- Informal Economy --- Underground Econom --- Energy: Demand and Supply --- Prices --- Economics of specific sectors --- Price controls --- Informal economy --- Fuel prices --- Price adjustments --- Government policy --- Informal sector --- Economics

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This paper reviews the literature on the informal economy, focusing first on empirical findings and then on existing approaches to modeling informality within both partial and general equilibrium environments. We concentrate on labour and credit markets, since these tend to be most affected by informality. The phenomenon is particularly important in emerging and other developing economies, given their high degrees of informal labour and financial services and the implications these have for the effectiveness of macroeconomic policy. We emphasize the need for dynamic general equilibrium (DGE) and ultimately dynamic stochastic general equilibrium (DSGE) models for a full understanding of the costs, benefits and policy implications of informality. The survey shows that the literature on informality is quite patchy, and that there are several unexplored areas left for research.

Labor supply --- Informal sector (Economics) --- Credit --- Mathematical models. --- Hidden economy --- Parallel economy --- Second economy --- Shadow economy --- Subterranean economy --- Underground economy --- Artisans --- Economics --- Small business --- Labor --- Macroeconomics --- Money and Monetary Policy --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Labor Economics: General --- Employment --- Unemployment --- Wages --- Intergenerational Income Distribution --- Aggregate Human Capital --- Aggregate Labor Productivity --- Informal Economy --- Underground Econom --- Wages, Compensation, and Labor Costs: General --- Labour --- income economics --- Monetary economics --- Economics of specific sectors --- Informal employment --- Informal economy --- Labor economics --- Economic theory --- Informal sector --- India