The Role of Monetary Policy in Shaping Jordan's Economic Growth: A Regression Analysis from 2008 to 2022

Abstract

Purpose: The aim of this research is to investigates the correlation between monetary policy and economic growth in Jordan during the period from 2008 to 2022. The study evaluates significant macroeconomic indicators, including inflation rate, interest rate, money supply, and economic growth, within and beyond the specified time frame. The objective of this study is to assess the influence of monetary policy on economic growth through the utilization of the statistical technique of least squares regression. Accurate results are obtained using EViews, a widely recognized statistical program. The data for this study is sourced from reputable institutions such as the World Bank and Trading Economics. Theoretical framework: The importance of this study holds great significance as it aims to examine the link between monetary policy and the growth of the economy, a topic that has been the subject of extensive theoretical and policy discussions among economists over a significant period. Given the current economic conditions characterized by slow growth and concerns about potential deflation, as well as perceived constraints on economic policies, there is heightened interest in understanding this relationship. Consequently, the debate surrounding this issue has occasionally become intense and contentious. Design/Methodology/Approach: The Methodology plays a crucial role in scientific research as it provides researchers with a framework to follow in order to achieve objective and reliable results. The choice of methodology may vary depending on the academic discipline, with each approach having its own unique characteristics and functions that are utilized by researchers in their respective fields of specialization. In the context of this particular study, a descriptive approach was adopted for the theoretical aspect, while an analytical approach was employed for the practical aspect. By collecting macroeconomic indicators as time series data from 2008 to 2022, the study aimed to investigate the interconnection implementation of monetary policy and the growth of the economy. To examine the stability of the variables, unit root tests were employed, and the data utilized in the study was obtained from reliable sources such as the World Bank and Trading Economics. Findings: The result of this analysis reveals significant findings regarding the influence of various factors on economic growth from 2008 to 2022. The findings reveal a statistically significant negative association between the inflation rate and economic growth, with a significance level of 0.05. Based on this finding, the null hypothesis (H0) is rejected in favor of the alternative hypothesis (H1). However, the study determines that the impact of the interest rate on economic growth is not statistically significant at the 0.05 significance level. Consequently, the null hypothesis (H0) is accepted, and the alternative hypothesis (H1) is rejected. Finally, the analysis reveals a statistically significant positive relationship between money supply and economic growth, with a significance level of 0.05. As a result, the study rejects the null hypothesis (H0) and supports the alternative hypothesis (H1). These findings offer valuable insights into the connection between monetary policy and economic growth within the specified timeframe. The study highlights the need for further comprehensive research on the factors influencing the growth of the Jordanian economy. Specifically, it emphasizes the importance of investigating various indicators of monetary policy and their effects on economic growth in Jordan. It is recommended to consider inflation rate policies and implement economic reform measures to mitigate the adverse impacts of inflation on economic growth in the country. Furthermore, careful attention should be given to money supply and the policies implemented by relevant institutions, particularly regarding the circulation of money, due to its positive influence on economic growth. Research, practical & social implications: The aims of this study is to examine the interplay between various monetary policy instruments and the dynamics of economic growth, with a specific focus on the context of Jordan. The objective of this study is to assess the influence of monetary policy on economic growth through the utilization of the statistical technique of least squares regression. Accurate results are obtained using EViews, a widely recognized statistical program. The data for this study is sourced from reputable institutions such as the World Bank and Trading Economics.