The Effect of Fiscal Policy on Economic Development in Jordan

Al-Shatti, Ali Sulieman

doi:10.5539/ibr.v7n12p67

Cited by 4 publications

(1 citation statement)

References 12 publications

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“…Therefore, government involvement and influence are necessary to stimulate economic growth. Borrowing money for economic expansion has been implemented in various economies since World War II (Al-Shatti, 2014). However, the effectiveness of fiscal policy in achieving growth by borrowing can lead to inflation and crowding out of private investment (Mankiw, 2000).…”

Section: Introductionmentioning

confidence: 99%

Business or Politics: Exploring the Determinants of Policy Mix in South Asia

ALI,

HASAN,

ABBASI

et al. 2023

BBE

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This study explores the determinants of policy mix in South Asia from 2000 to 2022, by using panel least squares and fixed/random effect models. We have used defense spending, health and education expenditures, corruption levels, and financial development, whereas policy mix, monetary freedom and fiscal freedom have been used as dependent variables. In South Asian nations, defense spending have statistically insignificant and adverse affect on policy mix. Conversely, higher investments in health and education show a notable positive impact on the policy mix, contributing to overall well-being and economic stability. Corruption levels and financial development do not significantly correlate with the policy mix. Our study also uncovers distinct relationships between these independent variables and fiscal and monetary freedom. Defense expenditures negatively affect fiscal freedom, while health and education spending plays a positive role. A well-educated and healthy workforce significantly enhances fiscal freedom. Corruption levels have no significant linear relationship with fiscal freedom, but financial development creates a trade-off between financial stability and fiscal freedom. Interestingly, defense expenditures positively affect monetary freedom, highlighting their role in creating a secure environment for investments. Education spending also positively impacts monetary freedom. Corruption levels do not significantly correlate with monetary freedom, but financial development negatively affects it, indicating a trade-off between financial development and monetary freedom. To enhance policy mix and economic and monetary stability in South Asia, we recommend strategically allocating more resources to the health and education sectors. Careful assessment and possible reallocation of defense budgets can reduce the fiscal burden and promote efficient resource utilization. Balancing defense spending with economic priorities can maximize its positive impact on monetary freedom, stimulating economic growth in the region.

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Section: Introductionmentioning

confidence: 99%

Business or Politics: Exploring the Determinants of Policy Mix in South Asia

ALI,

HASAN,

ABBASI

et al. 2023

BBE

View full text Add to dashboard Cite

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Sectoral Growth and Income Inequality in Sub-Saharan Africa: The Role of Fiscal and Monetary Policies

Cantah,

Bondzie,

Sebu

2022

The Palgrave Handbook of Africa’s Economic Sectors

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The Effectiveness of Fiscal Policy on Economic Growth in South Africa: An Empirical Analysis

Pamba¹

2022

International Journal of Management Research and Economics

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The study uses annual time series data from the South Africa Reverse Bank (SARB) from 1980 to 2020 to examine the effectiveness of fiscal policy on economic growth in South Africa. The Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP) unit root tests, as well as the Johansen Co-integration test, Granger causality test, and Vector Auto-Regression (VAR) method, were used in the study. Real GDP per capita (RGDP) is used as proxy of economic growth and Gross Fixed Capital Formation (GFCF), Government Expenditure (GEXP) and Government Deficit (GOVD) as the proxies of fiscal policy. The ADF test results show that all variables are stationary at the first difference, with the exception of GFCF and GEXP, which are stationary at I(0), whereas the PP test results show that all variables are stationary at I(1), with the exception of GEXP, which is stationary at I(0). At maximum Eigenvalue, the four variables are not cointegrated. The findings of the Granger causality test demonstrated a unidirectional causation from GOVD to RGDP, as well as a bidirectional causality from RGDP to GFCF and GEXP. Error Correction Model Estimated using VAR shows that GFCF, GEXP have positive effect on RGDP whereas GOVD has a negative effect on RGDP in the short run. The findings also presented that the VAR's residuals are homoscedastic, which means they are normally distributed and have no serial correlation.

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The Effect of Fiscal Policy on Economic Development in Jordan

Cited by 4 publications

References 12 publications

Business or Politics: Exploring the Determinants of Policy Mix in South Asia

Business or Politics: Exploring the Determinants of Policy Mix in South Asia

Sectoral Growth and Income Inequality in Sub-Saharan Africa: The Role of Fiscal and Monetary Policies

The Effectiveness of Fiscal Policy on Economic Growth in South Africa: An Empirical Analysis

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