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 The Islamic Chamber of Commerce , Industry and Agriculture (ICCIA)

The structure of public debt in Jordan and its impact on economic growth (1980-2012)

Source : Radi AL-Adayleh and Hassan AL-amro and Huthaifa AL-Gralleh

Category : Economy‏

Publish Date : April 28, 2014


The intention of this study was to investigate the structure of public debt in
Jordan and its impact on economic growth, over the period 1980-2012.
The statistical techniques which were employed in this study include Johanson
co-integration test, Vector Error Correction Model (VECM) to explore the
association between domestic debt and external debt ratio of GDP as independent
variables and the total debt relative to GDP as the dependent variable, Also Fully
modified least squares (FMOLS) approach is employed in order to describe the
impact of internal and external debt on economic growth.
The co-integration test procedure reveals that there is one relationship,
consequently an (VECM) was estimated revealing that 9 % of the departure
from equilibrium is cleared annually, and the results of Causality test showed
that independent variables have uni-directional relationship with the total debt as
the dependent variable .
Based on regression coefficient, it was found that external debt has a negative
influence, and domestic debt has positive influence on economic growth .
The study recommended that the external debt must be re-oriented toward
invested in productive projects in order to the burden of debt service.