Abstract
In the past decade, the fundamental problems associated with the real gross domestic product (GDP) in Jordan are apparent since the foreign aid is highly influenced by macroeconomic shocks that have severely affected the GDP through changes in macroeconomic factors. However, this relationship has not been adequately addressed. The main purpose of this paper is to investigate the influence of foreign direct investment and aids and trade openness on economic growth in Jordan by employing time series data from 1970 to 2017. The Autoregressive Distributed Lag (ARDL) model and Bayer-Hanck Cointegration was employed to examine the relationship between the variables empirically. The findings revealed the existence of a long-run relationship among the variables. Foreign direct investment (FDI), aids, trade openness and structural breaks are positive and significantly influencing the economic growth in both short run and long run. The results recommended that higher foreign investment may increase the ability of aids to increase the economic growth. Therefore, policy makers should balance between investment friendly policies such as foreign direct investment that will be attracted into the country for sustainable economic growth.
Highlights
International transfers are significant features of the global economy
It can be observed that GDPG, Foreign Direct Investment (FDI), A and TOP have a positive relationship at 1% level of significant
This paper had investigated the nexus between foreign direct investment, foreign aids, trade openness and structural breaks, and endogenous economic growth in Jordan using annual time series data over a period of 1970 to 2017
Summary
International transfers are significant features of the global economy. Foreign Direct Investment (FDI) is one of the most important components of such transfers. Especially developing nations target to attract FDI into their economies, as they expect the long-term economic growth from additional stable resources in host countries. There are some more fundamental reasons that support the attractiveness of FDI, such as advanced technology, skills, research and development (R&D) and know-how to host countries. These intangible assets would be useful for host countries to stimulate productivity and economic growth. FDI appears to offer good characteristics ranging from a high degree of stability, financial resource augmentation, positive productivity effects and access to foreign market (Iamsiraroj, 2016) In addition, in developing countries for example Jordan, to finance the development program foreign aid is considered as an essential source. The estimation of foreign aids to the economies of developing nations does truly exist, it is important to comprehend its offering to the economic increase
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