The Fiscal Multiplier and Its Determinants: An Econometric Analysis for the Case of Jordan during the Period (1975-2017)

Abstract

This study aimed to analyze the impacts of government expenditure and the public revenues on economic growth via the estimation of the fiscal multipliers for the period of (1975-2017). Also, the study analyzed the value and effects of the determinants of this multiplier, namely the openness of trade, public debt, the exchange rate, and the size of automatic stabilizers. In order to achieve these purposes, the study used the descriptive approach and the Auto-Regressive Distribution Lag (ARDL) approach. the tests showed that the variables became stationary after taking the first difference, and the variables are co-integration. The results of the study showed that the value of the fiscal multiplier of the government expenditure in the short and long term is about (1.34 and 3.60) respectively, and if we added its determinants, the value of the multiplier is estimated (2.80 and 2.97) respectively. The fiscal multiplier for the public revenues was estimated (1.17 and 4.10) respectively in the short and long term, but in the case of adding its determinants, the multiplier value is estimated (0.80 and 3.97) respectively. Based on the findings, the study recommended the government to increase its capital expenditures, although at the expense of carrying additional debt at present, to provide higher economic growth and encourage and attract an environment for investments.