Determinants of Domestic Investment in Jordan: ARDL Techniques

Suleiman W. Almasaied

Abstract


The study investigates the determinants of domestic investment in Jordan with time series data during the 1980-2005 period with focus on post-reform era efforts. Both the short-run and long-run movement of the investment process are modelled using the recent developed autoregressive distributed lag (ARDL) approach to cointegration. The results are confirming previous results found in empirical literature. Namely, the growth rate of GDP and exports are significant in stimulating domestic investment. Foreign Direct Investment (FDI) "crowds in" domestic investment but with less magnitude. In addition, the development level of financial sector and human capital is crucial for stimulating domestic investment only in long term. While, increase in domestic credit availability enhancing domestic investment in short-run. Hence, it is arguably worthy for the authorities to go on post-reform era efforts by encouraging both exports expansion, sustain current GDP growth rates and attracting more FDI to stimulating domestic investment.


Keywords


Investment, FDI, Financial Intermediation, ARDL, Jordan

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