The Monetary Sector and Economic Growth in Jordan: Further Evidence

Ahmad Mohammad Mashal, Zakia Ahmad Mishal

Abstract


The present study examined the causal relationship between economic growth and financial sector development for the Jordanian economy over the last three decades. There is limited time-series econometric evidence that documents the link between Jordanian economic growth and financial markets. Causality tests are preceded by cointegration testing which provides a more natural setting for causality studies and inferences. Our findings provide evidence of a stable long run equilibrium relationship between banking system development and economic growth. Moreover, the feedback effects show that the stock market does lead to economic growth in Jordan for the short run only.

Keywords


GDP Growth, Stock Market Development, Banking sector Development, Financial Sector Development, Error-Correction Mechanism.

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