Abstract
Due to the lack of studies in the financial literature on indicators of corruption and political instability relative to investment, this paper is considered one of the first studies that examines the impact of two-corruption indicators and political instability on investment in Jordan over the period 1987–2020. Using Fully Modified Ordinary Least Squares (FMOLS) based on annual data, the corruption effect as measured by the corruption score index is a negative and statistically significant impact on investment in Jordan. The second measure of corruption, which is the corruption rank index, confirmed the previous result that corruption has a negative and statistically significant effect. Political instability measured in this study as a dummy variable by wars in the region has a positive and statistically significant effect on investment. For macroeconomic variables, the results show that current government expenditure and interest rate have a negative and significant impact on investment in Jordan. The interest rate factor was the highest coefficient among the negative effects. The study also shows that the investment in Jordan is positively and significantly affected by growth domestic product, imports and local revenue. The gross domestic product showed the highest coefficient among the positive effects. This study concludes that policy makers attempt to apply transparency and minimize the corruption through flexibility, facilitation of procedures and reduced transactions using automation. The study also concludes that decision makers should rationalize current government expenditure and direct banks in Jordan to give greater priority to credit facilities for productive sectors.
Highlights
Jordan has witnessed many economic changes internally and political changes externally in the region that affected the levels of investment
The results show that current government expenditure and interest rate have a negative and significant impact on investment in Jordan
This study examines the impact of two important factors, namely corruption and political instability, as well as macroeconomic factors, on investment in Jordan over the period 1987–2020
Summary
Jordan has witnessed many economic changes internally and political changes externally in the region that affected the levels of investment. It has been noted that the investment rate has fluctuated significantly during the past decades. Based on the data of the Central Bank of Jordan website, the percentage change in investment indicator shows that it is unstable and fluctuates from -0.13 to 0.64 over the period 1987-2020. Based on the report of the Jordan Strategic Forum is issued in June 2021 on the Jordanian economy for the year 20162020, the number of newly established companies decreased from 7,061 companies in 2016 to 4,134 companies in 2020. It is well known that investment plays a major role in increasing exports and production rates. Investment affect in reducing unemployment levels and plays an important role in increasing development rate.
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