The Effect of Real Interest Rate on Real Economic Growth in Jordan

Abstract

Objectives: This study aims to investigate the effect of the real interest rate on economic growth in Jordan, using annual data for the period from 1990 to 2019.
 Methods: To achieve the study's objectives, both the descriptive and analytical curriculum was used using the Autoregressive Distributed Lag (ARDL) method.
 Results: The study revealed that there is a statistically significant negative effect of the real interest rate on economic growth in Jordan, as when the real interest rate increases by (1%), the real economic growth decreases by (0.97%), and there is a statistically significant negative effect of the inflation rate on economic growth in Jordan, as when the inflation rate increases by (1%), the real economic growth decreases by (0.85%). In addition, there is a statistically significant exponential impact of the money supply on Jordan's economic growth, as when the growth in the money supply increases by (1%), real economic growth increases by (0.49%).
 Conclusions: The study recommended that an expansionary monetary policy should be pursued to increase market liquidity. It also recommended reducing loan interest rates to improve and create an investment environment to attract investment and revive the economy, thereby driving economic growth with the fiscal policy's work to maintain stable inflation rates.