The Effects among Economic Sectors in Jordan: Estimation and Analysis by Vector Autoregression (VAR)

Sa'eed Al-Tarawneh

Abstract


This study aims to: 1). Estimate and analyze the intersectoral relations among economic sectors in Jordan. 2) Determine the leading sectors. 3) Evaluate the development strategy that had been adopted in Jordan. 4) Evaluate the impacts of sectoral relations on effectiveness of policies such as: export and tourism encouragement.

The study used data for 1968-2005 period for growth rates of value added of five major sectors. These sectors include: agriculture, mining, manufacturing, construction and service.

The estimation conducts by employing Vector Auotoregression (VAR) after detecting stationarity through Dickey-Fuller and Philip - Perron tests. Analysis of variance decomposition and impulse response function revealed that there is: 1). Weak relations among sectors. 2). No leading sectors. 3). Inappropriate development strategy that had been applied. 4). Slight expected consequences from export, tourism and other policies. The study recommends formulating a comprehensive strategy that aimed to create leading sectors. The main concern of this strategy should be optimal exploitation of local and imported raw materials, such as: Developing food industries, Re-exploitation of glass material, Establishing petrochemical complex and Exploitation of phosphate to produce material instead of exporting it as a raw material.


Keywords


Linkages, Leading Sectors, Balanced Development Unbalanced Development.

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