Abstract
The effect of the international currency crises on the Jordanian balance of payments (BoP) between Q1-2000 and Q4-2017 was investigated in this paper. The currency crises are represented by the various exchange rates (ER) for the Japanese Yen, United States (US) Dollar, Euro Member Countries, China Renminbi, and the United Kingdom (UK) Pound with the Jordanian Dinar. In approximating the potential short-run and long-run associations among the different ER variations and the BoP, the ARDL bounds testing technique was employed. The empirical findings revealed that variation in the ER rate for EUR/JOD had a positive significant impact on the BOP for the short-run and long-run relation, whereas, opposingly, for the JPY/JOD, it had a negative significant impact on the BoP in the short-run and long-run relations. For other currencies, the results varied. Therefore, to reduce the effect of currency fluctuations and resultant crises on the BoP, over-reliance on the promotion and importation of goods and domestic export products should be avoided. As such, in the context of the Jordanian economy, the country needs to diversify. Accordingly, this can only be achieved if the economy is expanded along with advancing and developing entrepreneurial innovation supported by fiscal disciplines.
Highlights
Balance of payment (BoP) has attracted significant attention globally, in economic and finance domains
Prior to conducting the autoregressive distributed lag (ARDL) bounds test, there was a requirement to test for the stationarity status of the variables in determining their integration arrangement or order in order to confirm that the variables were not stationary in order 2 to evade false results
The execution of the unit root tests in the ARDL technique was necessitated in order to confirm that none of the variables were integrated of order 2 or beyond
Summary
Balance of payment (BoP) has attracted significant attention globally, in economic and finance domains Developing countries mainly suffer or are disadvantaged in many respects due to the openness of their economies to the economies of other developed countries, making them more vulnerable or exposed to international economic variations or fluctuations As such, they are more exposed to external crises, which adversely affects the extent of stability from a local perspective (Alawin & Oqaily, 2017; Hamouri, et al, 2018). The term „currency crisis‟ can be defined as the depreciation of a particular currency, foreign exchange crisis, or BoP crisis, which are all familiar terms used nowadays to describe such a crisis This form of crisis associated with international currencies is harmful to the economy, which extends to neighboring countries, including countries with economic relations with the same country. Section Three presents and outlines the methodology and approach employed, followed by Section Four, which discusses the analysis and results, and lastly, Section Five presents the main findings of the study, including limitations, implications and recommendations
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