The Impact of Tourism Income on Foreign Reserves in Jordan during the Period 2005-2020

Abstract

This study aimed to analyze the impact of tourism income on foreign reserves in Jordan during the period 2005-2020. The study used annual data related to three variables (foreign public debt, trade balance deficit, and workers’ remittances) during the study period; the data were collected from the annual reports issued by the Central Bank of Jordan and the Jordanian Ministry of Tourism and Antiquities. To achieve the aim of the study, the fully modified least squares (FMOLS) test was applied. Among the most important findings of the study according to the Johansen statistical test was the existence of a long-term equilibrium relationship between tourism income and foreign reserves and between the three variables between the variables (foreign public debt, trade balance deficit, and workers' remittances) and foreign reserves. The empirical results of the study also showed a positive and significant effect of tourism income on foreign currency reserves and a positive and significant impact of both foreign public debt and remittances of workers abroad on foreign reserves. This finding was obtained through the statistical FMOLS model. Among the most important recommendations of this study is the need for the Jordanian government to pay more attention to the issue of foreign reserves to keep them at high and comfortable levels. This can be achieved through the Jordanian government’s set of procedures and reviews of laws and policies related to the tourism sector, as it is one of the most important financing sources of foreign reserves. In this regard, the government must provide the necessary infrastructure to revitalize the tourism sector, in addition to reviewing the tax policies and fees imposed on the sector.