Topics on financial crises in emerging countries case of Jordan

This thesis investigates the effect of monetary policy on financial stability and part of the real side of the Jordanian economy over the time period 1976-2009. It uses a number of empirical methodologies including: a Vector Autoregressive (VAR) to investigate the relationship between monetary policy and financial stability in Jordan; A Logit model and Markov switching model to study the currency crisis in Jordan; and an Autoregressive Distributed Lag (ARDL) to estimate an investment function for the Jordanian economy. Findings of the VAR models confirmed the relationship between monetary policy and financial stability in Jordan. However, a number of indictors were found to have a significant effect on the currency crisis in Jordan. These indictors included the real exchange rate, money supply-reserves ratio, and growth rate of domestic credit. On the other hand, a stable long-run investment function exists. Real income and real credit were found to have a positive impact on real investment. However, the user cost of capital has had a negative impact on real investment

DETERMINANTS OF CURRENCY CRISIS IN JORDAN A MULTINOMIAL LOGIT MODEL

In this paper, an early warning system will be developed to explain any potential currency crisis and identify a number of leading indicators that can help the understanding of the crises, using Jordanian data. The methodology of this paper includes utilizing the Multinomial Logit analysis. The paper has found evidence that number of key indicators including real exchange rate (RER), money supply-reserves ratio (M2R), growth rate of domestic credit (ΔDC) and Central Bank foreign assets to liabilities ratio (AL), play significant roles in explain the currency crises. While their marginal effect varies, they are consistent with theory in terms of signs

Remittances and Real Investment in Jordan: Is There a Link? An Empirical Investigation

The study attempts to test the long-run equilibrium relationships between the flows of workers’ remittances, and real investment. Using Jordanian data, over the period 1976 to 2012, the empirical results provide strong evidence on the presence of a long-run stable investment function. In the short-run, remittances has a positive and significant effect on the real investment; a consistent result with the literature. Therefore, the results confirm the significant impact of worker’s remittances on the real investment found in the previous literatureusing a cointegration technique. Both Engle-Granger and Johansen cointegration tests show that real investment and remittances are cointegrated and there is clear evidence on the presence of a long-run relationship among them in Jordan. This is based on the statistical significance of the coefficient of the error correction term. The estimated coefficient is –0.545 and statistically significant with the anticipated negative sign, which indicates that the speed of adjustment to equilibrium in the long-run is relatively high. This finding emphasises the importance of the flows of remittances to labour-exporting countries on the real investment especially in the case of Jordan. JEL Classification: F24, E22, C3