The Relationship between Public Debt and Economic Growth in Jordan for the Period (1990-2018)

Waleed Kalf Ali Alzoubi ,Sami Nizar Khasawneh ,Osama Mahmoud Awad Al Zoubi

doi:10.7176/jesd/11-12-09

Waleed Kalf Ali Alzoubi , Sami Nizar Khasawneh + Show 1 more

Open Access

https://doi.org/10.7176/jesd/11-12-09

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Abstract

The study aims to identify the effect of public debt on economic growth in Jordan between1990 and 2018. The importance of the study lies in the effects of net public debt on the Jordanian economy and economic stability, and thus the identification of the role of public debt in Jordanian economic growth. To achieve the aim of the study the descriptive analytical approach was used. Simple Linear Regression (SLR) has been employed to measure and analyze the relationship between Net Public Debt (NPD) and Gross Domestic Product (GDP). The study showed that there is a clear negative relationship between the ratio of NPD to GDP and the rate of economic growth in Jordan during the first period of the study, and this relationship became more clear during the period 2006-2018, and this negative relationship became strong when the public debt ratio to GDP exceeded 80.0%. Keywords : Gross Domestic Product (GDP), Net Public Debt (NPD), Net External Debt (NED), Net Domestic Debt (NDD), Economic Growth (EG), Jordan. DOI: 10.7176/JESD/11-12-09 Publication date: June 30th 2020

Highlights

The debt problem has emerged as one of the most prominent obstacles facing developing countries, because of its negative effects on the process of economic and social development
The results showed that there is a negative impact of public debt on economic growth, and that the negative impact of external public debt and domestic public debt on the economy is the same
It was found that the results are compatible with economic theory and previous studies, and the results have shown that the impact of public debt on economic activity will be negative in the long run

Summary

Introduction

The debt problem has emerged as one of the most prominent obstacles facing developing countries, because of its negative effects on the process of economic and social development. Development in these countries collided with the decrease in their local savings, high consumption rates and the lack of local investments. The need has emerged to study the structure of the Net Public Debt (NPD) and explain its impact on Economic Growth (EG), whether the debt is domestic or external. Does Net Public Debt (NPD) affect Economic Growth (EG) in Jordan? What are the trends in the development of Net Public Debt (NPD)?

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