Abstract
This study aims to examine the effect of monetary and financial variables on share prices of Jordanian commercial banks for the period 2001–2018. The monetary variables used in the research include broad money supply, the interest rate on time deposits and inflation, while financial variables include both the deficit of the general budget and government expenditures, and the general government domestic debt. A multiple linear regression equation is designed using E-Views program to test this effect. The study shows that there is a significant positive effect of broad money supply, whereas a negative effect of the general budget deficit and a positive effect of the domestic debt on share prices of commercial banks in Jordan for the specified period. In contrast, there is no effect of both inflation and the interest rate on time deposits and government expenditures on the price of shares of Jordanian commercial banks. The study recommends taking into account the relationship between the variables mentioned in the prices of shares of commercial banks when setting monetary and financial policies by the central bank and the government to determine the extent to which these variables reflect share prices of Jordanian commercial banks. Overall, the regression model reached R2 = 0.63, and this means that 63% of the change in the share prices of Jordanian commercial banks is due to changes in the independent variables included in the model.
Highlights
A large volume of national and foreign savings is traded in the financial markets through the sale and purchase of shares and bonds
There is no effect of both inflation and the interest rate on time deposits and government expenditures on the price of shares of Jordanian commercial banks
This means that rising money supply by supply, inflation, budget deficit, and government 1% leads to an increase in prices of securities of expenditure have been obtained from the annual Jordanian commercial banks at a rate of 5.232%, reports issued by the Central Bank of Jordan and and it is a strong impact of money supply on the the Association of Jordanian Banks over the peri- shares of commercial banks
Summary
A large volume of national and foreign savings is traded in the financial markets through the sale and purchase of shares and bonds. 2001–2015 and found a positive and significant re- or broad sense and the share price index in Saudi lationship between the exchange rate, money sup- Arabia On the contrary, it found that the share ply, consumer prices, the interest rate on treasury prices of the stock exchange mentioned affected bills, and the return on the financial market, while the presentation of money supply in the narrow they found a negative and insignificant relation- sense (M1) in the case using the annual data. The study by Momani and Alsharari (2012) aimed to indicate the effect of the macroeconomic factors of interest rate, GDP, money supply and the MONETARY AND industrial production index on the stock prices on the Amman Stock Exchange in 1992–2010.
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