الفعالية النسبية للسياستين النقدية والمالية: بينة من الأردن: The Relative Effectiveness of Monetary and Fiscal Policies: Evidence from Jordan

Elham Mohammad Alhaj Yousef; Eman Abdel Khalik Fseifes

doi:10.7187/GJAT122021-12

Authors

Elham Mohammad Alhaj Yousef Economic researcher in the Excellencors for Training and Performance Developments, Amman, Jordan
Eman Abdel Khalik Fseifes Economic Researcher, Amman, Jordan

DOI:

https://doi.org/10.7187/GJAT122021-12

Keywords:

Monetary policy, Fiscal policy, Economic growth, Government expenditures, Broad money supply

Abstract

The study aims at investigating the relative effectiveness of monetary and fiscal policies on economic growth of Jordan during the period 1977-2019 using Autoregressive Distributed Lag (ARDL) methodology. The variables of the study were integrated of different orders as indicated by Augmented Dickey-Fuller (ADF) unit root test. Bounds cointegration test revealed that there is a cointegrated long-run relationship between the study variables. The study results showed that there is a statistically significant positive long-run relationship between real GDP and each of broad money supply and total government expenditures. Moreover, the long-run coefficient of money supply was much greater than that of government expenditures, implying that the effectiveness of monetary policy is higher than that of fiscal policy in affecting the economic performance, and both policies can be implemented to stimulate the economic growth in Jordan. Therefore, the study recommends the Jordanian government to improve the management of fiscal policy by controlling its current expenditures, increasing the productive investments, as well as applying a comprehensive tax reform in order to strengthen the role of fiscal policy in boosting the economic growth.

Author Biography

Eman Abdel Khalik Fseifes, Economic Researcher, Amman, Jordan

References

Andersen, L., & Jordan, J. (1968). Monetary and Fiscal Action: A Test of their Importance in Income Stabilization. Federal Reserve Bank of St. Louis, Review, 11, 11-24.

Ando, A., & Modigliani, F. (1965). The Relative Stability of Monetary Velocity and the Multiplier. American Economic Review, 3, 693-728.

Arestis, P., Şen, H., & Kaya, A. (2019). Fiscal and Monetary Policy Effectiveness in Turkey: A Comparative Analysis. Panoeconomicus, Advance online publication, 1-24. doi:10.2298/PAN190304019A

Awad, T. & Alsowaidi, S. (2005). Effectiveness of Monetary and Fiscal Policies: the Case of Qatar. Journal of Business and Economics, 11(1), 112-129.

Bernanke, B., & Blinder, A. (1992). The Federal Funds Rate and the Channels of Monetary Transmission. American Economic Review, 82, 901-921.

Dickey, D.A., & Fuller, W.A. (1979). Distribution of the Estimators for Autoregressive Time Series with a Unit Root. Journal of the American Statistical Association, 74, 427-431.

Friedman, M., & Meiselman, D. (1963). The Relative Stability of Monetary Velocity and the Investment Multiplier in the United States, 1897-1958. In Stabilization Policies, 165-268. Englewood Cliffs, N.J.: Prentice-Hall.

Friedman, M., & Schwartz, A. (1963). A Monetary History of the United States, 1867-1960. Princeton, N.J.: Princeton University Press.

Granger, C. W. J. (1969). Investigating Causal Relations by Econometric Models and Cross-Spectral Methods. Econometrica, 37(3), 424-438.

Habibur Rahman, Md. (2005). Relative Effectiveness of Monetary and Fiscal Policies on Output Growth in Bangladesh: A VAR Approach. Policy Analysis Unit, Bangladesh Working Paper WP0601. Retrieved from http://econpapers.repec.org/RePEc:ess:wpaper:id:2100.

Kahn, G. A. (1991). Does More Money Mean More Bank Loans? Federal Reserve Bank of Kansas City Economic Review, 76(4), 21-32.

Keynes, J.M. (1936). The General Theory of Employment, Interest and Money. London: MacMillan.

Malawi, A. (2009). The Relative Importance of Monetary and Fiscal Policies in Economic Activity: A Comparison between Jordan and Tunisia by Using an Error Correction Mechanism (ECM). Dirasat, Administrative Sciences, 36(1), 191-198.

Pesaran, M. H., & Shin, Y. (1998). An Autoregressive Distributed-Lag Modelling Approach to Cointegration Analysis. Econometric Society Monographs, 31, 371–413.

Pesaran, M.H., Shin, Y., & Smith, R.J. (2001). Bounds Testing Approaches to the Analysis of Level Relationships. Journal of Applied Econometrics, 16, 289–326.

Serletis, A., & Koustas, Z. (1998). International Evidence on the Neutrality of Money. Journal of Money, Credit and Banking, 30(1), 1-25.

Waud, R. (1974). Monetary and Fiscal Effects on Economic Activity: a Reduced Form Examination of Their Relative Importance. Review of Economics and Statistics, 56(2), 177-187.