Abstract
The exchange rate is regarded as one of the most important prices because it is depended by the country to exchange products with other countries. In other words, it determines the country competitive ability. Exchange rate affects the balance of payments, real growth, inflation rate and connects the national with international economy through three markets: commodity markets, asset markets and production factors markets. The importance of the research rises from analyzing the reasons, scope and the trend of changes taken place with Dinar exchange rate and their reflection on the level of goods prices and inflation rates in Erbil City during the period of study. The research aims to apply a theoretical side of exchange rate, besides knowing the trend of Dinar exchange rate changes in Erbil Markets and the affect of their changes on general level of goods prices. The research problem is represented in Iraqi Dinar exchange rate that is fluctuated against foreign currencies especially the U.S Dollar and their reflection on general prices level in Erbil City. The hypotheses are: - Exchange rate changing and affects the general prices level in Erbil City within the research period. - Inflation rate moved within same period. To realize the hypothesis, the research was divided into two parts; the first one related to the exchange rate issues (theoretical side), while the second concerns the Iraqi Dinar exchange rate and its changes in the City. The research also showed that the exchange rate in Erbil City faced three stages: - First One: Through the period 1992 – 2003. - Second: Through the period 2004- 2006. - Third: Through 2007 till now. Latterly, the research reached some conclusions and suggestions; the general price level in Erbil City affected directly by exchange rate suggested that the Central Bank must continue its role in stabling the Dinar through continuously intervene selling the Dollar. ).