Macroeconomic determinants of Jordan’s external debt in the period 1980–2022 using ARDL

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This paper addresses the macroeconomic determinants of Jordan’s external debt. The study aims at exploring the impact of foreign direct investment inflows on external debt service, gross domestic product (GDP), inflation, government spending, and real exchange rate, on the external debt of Jordan from 1980 to 2022. The study utilizes the autoregressive distributed lag (ARDL) bound cointegration econometric model to establish long-run relationships between variables. The model also investigates short-run dynamics via an error correction model to give insight into how quickly the system returns to equilibrium following a shock. Statistical results demonstrate an inverse link between foreign direct investment and debt, where a 1% increase in investment reduces debt by 0.15311%. Similar patterns are seen with GDP and external debt, where a 1% GDP rise reduces debt by 0.4743%. Government spending shows a direct relationship, with a 1% increase causing a 1.02049% debt rise. Real exchange rate and inflation impact debt, with a 1% rise causing debt to increase by 0.067 and decrease by 0.00771 dollars, respectively, though these effects are relatively small. In the short run, the system adjusts to shocks with an error correction coefficient indicating a 24% correction to equilibrium each period.

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    • Figure 1. Foreign direct investment inflows to Jordan, 1980–2022
    • Figure 2. External debt 1980–2022
    • Figure 3. Government spending 1980–2022
    • Figure 4. CUSUM stability test
    • Figure 5. The Jarque-Bera normal distribution test
    • Table 1. Summary variables and expected signal
    • Table 2. Summary statistics, 1980–2022
    • Table 3. Phillips-Perron test results
    • Table 4. VAR lag order selection criteria test
    • Table 5. ARDL bounds test for the existence of cointegration
    • Table 6. Long-run estimated coefficients based on the ARDL model (3,3,0.0,2,0.0)
    • Table 7. Results of estimating the error correction model (ECM)
    • Table 8. Breusch-Godfrey serial correlation LM test
    • Table 9. Heteroskedasticity test: ARCH
    • Conceptualization
      Atef Baniata, Ahmad Alnawasreh, Faten Nsairat
    • Data curation
      Atef Baniata, Ahmad Alnawasreh, Faten Nsairat
    • Formal Analysis
      Atef Baniata, Ahmad Alnawasreh, Faten Nsairat
    • Funding acquisition
      Atef Baniata, Ahmad Alnawasreh, Faten Nsairat
    • Investigation
      Atef Baniata, Ahmad Alnawasreh, Faten Nsairat
    • Methodology
      Atef Baniata, Ahmad Alnawasreh, Faten Nsairat
    • Project administration
      Atef Baniata, Ahmad Alnawasreh, Faten Nsairat
    • Resources
      Atef Baniata, Ahmad Alnawasreh, Faten Nsairat
    • Supervision
      Atef Baniata, Ahmad Alnawasreh, Faten Nsairat
    • Validation
      Atef Baniata, Ahmad Alnawasreh, Faten Nsairat
    • Visualization
      Atef Baniata, Ahmad Alnawasreh, Faten Nsairat
    • Writing – original draft
      Atef Baniata, Ahmad Alnawasreh, Faten Nsairat
    • Writing – review & editing
      Atef Baniata, Ahmad Alnawasreh, Faten Nsairat