The influence of indirect monetary tools on price and output: the case of Jordan (1993-2013)

  • 800 Views
  • 268 Downloads

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

This research aims to identify the main monetary policy tools in Jordan, then, to estimate their effect on price and output level. A time series data covering the period between 1993 and 2013 were utilized to estimate the targeted models using two-step regression. Firstly, the authors measured the impact of indirect policy tools on money supply and, secondly, they determined the impact of money supply on price and output levels.
Results show that open market operations of the Central Bank of Jordan through issuance of certificates of deposit, especially at the beginning of 1993 and the repurchase agreements have been effective in influencing the money supply in Jordan. Unfortunately, this policy was not able to control the real or nominal output level even though it has an effect on the price level.

Keywords: monetary policy, open market operations, required reserve ratio, discount rate, price and output.
JEL Classification: E31, E42, E52, E58

view full abstract hide full abstract
  • References
    29
  • Tables
    5
  • Figures
    0
    • Table 1. The effect of indirect monetary policy tools on money supply. Money supply is the dependent variable
    • Table 2. The effect of money supply on price level (Price=100 in 2006). Price as the dependent variable
    • Table 3. The effect of money supply on output level. GDP is the dependent variable
    • Table 4. The effect of money supply on output. Nominal GDP as the dependent variable
    • Table 5. The effect of money supply on output real GDPt as the dependent variable