Abstract
This study investigates the impact of monetary and fiscal policies on the balance of payments (BoP) in Jordan. Through a robust econometric model, it explores the influence of key independent variables such as domestic credit, money supply, consumer price index, government expenditure, and tax revenue. Unit root test and co-integration (bound) test are employed to ensure methodological credibility. The analysis reveals significant relationships between these variables and the BoP-to-GDP (gross domestic product) ratio. Notably, domestic credit to GDP exhibits a significant positive relationship, while money supply to GDP has a substantial negative impact. Government expenditure to GDP shows a positive influence, whereas tax revenue to GDP lacks statistical significance. The consumer price index demonstrates a significant negative influence. Dummy variables representing the financial crisis and Arab Spring exhibit significant negative impacts. The model explains 65.26% of the variation in the BoP/GDP relationship. Additional diagnostic tests confirm the model’s robustness. This research offers valuable insights for policymakers aiming to enhance Jordan’s external sector stability and resilience.
Published Version
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