Jordan Journal of Economic Sciences

What Determines Egypt’s Demand for Foreign Reserves?

Ahmed Wassal Elroukh — Mon, 01 Jan 2024 00:00:00 +0100

Objective: The main objective of this paper is to identify the determinants of the demand for foreign reserves in Egypt.

Methods: The buffer stock model, quarter-century data spanning over the past 20 years, and Auto-Regressive Distributed Lag (ARDL) regression are all employed to estimate Egypt's demand function for foreign reserves, assess its stability, and predict how swiftly it may change if the underlying Cointegrated connection is disturbed.

Results: The results reveal that exports and imports have elasticities of demand for foreign reserves of 1.16 and -3.69, respectively. Moreover, Egypt's foreign reserve assets have notably increased due to foreign direct investment and foreign portfolio investment growth. Lastly, the demand function for foreign reserves is steady, and in the event of a shock, it returns to its steady state in less than two years.

Conclusion: To improve Egypt's foreign reserve holdings, policymakers should concentrate on measures encouraging exports and attracting foreign investment.

The Impact of Digital Development on Economic Growth: Empirical Evidence from Selected Arab Countries

Taleb Awad Warrad — Mon, 01 Jan 2024 00:00:00 +0100

Objectives: The main objective of this paper is to evaluate the primary determinants of real economic growth in the Arab region, with a particular emphasis on the role of digital development.

Methods: The study examines the key determinants of economic growth in eight selected countries from the Arab region, using panel data comprising 160 observations from the World Bank database. The data covers the period 2000-2020. An econometric model is utilized to achieve the study objectives by employing economic theory. Advanced econometric estimation methods (FMOLS, panel generalized method of moments GMM, and panel EGLS) are employed to estimate the model parameters. Additionally, as the sum of the elasticity coefficients is less than one, the selected Arab economies exhibit decreasing returns to scale (DRS), necessitating concerted efforts to enhance the productivity of all factors of production and reduce production costs in the long run.

Results: The study's estimation results indicate significant effects of all classical factors of production in promoting economic growth in the selected Arab countries. Specifically, the empirical analysis identifies the main contributors to real economic growth in the Arab region (arranged according to their importance): trade openness, labor productivity, investment (rate of capital accumulation), digital development, and technological progress.

Conclusions: Based on the results, the policy recommendation is that to boost real economic growth, Arab countries should adopt a balanced policy mix designed to promote trade liberalization, investment, labor productivity, and digital development, respectively.

Factors Affect Economic Well-being: Human Developing Index for Selected Arab Countries

Fatma Abdulla, Alaaeddin Al-Tarawneh — Mon, 01 Jan 2024 00:00:00 +0100

Objectives: This study aims to analyze the impact of several factors on economic well-being in numerous Arab countries, using the Human Development Index issued by the UNDP. These countries include Egypt, Algeria, Sudan, Iraq, Morocco, Yemen, Jordan, Tunisia, Mauritania, Djibouti, Comoros, and Lebanon between 2009 and 2019.

Methods: The analysis is based on Panel data using the Feasible Generalized Least Squares regression (FGLS), and several necessary tests are applied to determine the appropriate estimation method.

Results: The study's results show that globalization led to an improvement in welfare levels. Furthermore, the results indicate that the Corruption Index reduces welfare levels. In contrast, foreign direct investments did not show a statistically significant relationship with the Human Development Index during the selected period for the chosen countries. However, the results verify that government expenditures have a positive impact on improving welfare levels in these countries.

Conclusions: The study underscores the importance of combating corruption by avoiding repression and dictatorship and curbing the control of influential entities over power and effective government. In addition, there is a need to strengthen globalization incentives by facilitating international communication processes, easing visa procedures, and encouraging entry and exit from these countries. The study also emphasizes the need for media openness, technology dissemination, and improving trade openness.

The Symmetric and Asymmetric Nexus Between Monetary Policy Interest Rate and Core Inflation in Jordan

Ahmad Al-Majali, Renad Jehad Al-Shamaileh — Mon, 01 Jan 2024 00:00:00 +0100

Objectives: This study investigates monetary policy's symmetric and asymmetric impacts on core inflation in Jordan. It employs linear and nonlinear autoregressive distributed lag (NARDL) models. The research also seeks to assess the relationship between the overnight deposit rate, money supply growth, and real GDP growth on core inflation and to explore potential linear or nonlinear effects.

Methods: The study applies ARDL and NARDL models to estimate the relationships above. It utilizes data from the first quarter of 1998 to the first quarter of 2023. Tests for Granger causality are conducted, and the Brock-Dechert-Scheinkman (BDS) test is employed to ascertain the presence of nonlinear paths within the study variable. Robustness checks are conducted to ensure parameter stability.

Results: The analysis provides compelling empirical evidence supporting a long-term relationship between the overnight deposit rate and core inflation. The Brock-Dechert-Scheinkman (BDS) test confirms the existence of nonlinear dynamics. The ARDL model reveals a linear relationship: a 1% interest rate increase leads to a 0.26% reduction in core inflation in the long run. In contrast, the Nonlinear Autoregressive Distributed Lag (NARDL) analysis unveils an asymmetric effect: a 1% increase in the overnight deposit rate decreases core inflation by 0.43%, while a 1% reduction increases it by 0.37%.

Conclusions: These findings have critical implications for monetary policymakers. They underscore the importance of judiciously considering interest rate adjustments to manage inflation dynamics, acknowledging the nonlinear and asymmetric effects inherent in the relationship between the overnight deposit rate and core inflation. When crafting monetary policy strategies, policymakers must consider these nuanced dynamics to address inflation concerns effectively.

International Trade and Women Employment: The Case of Jordan

Mon, 01 Jan 2024 00:00:00 +0100

Objectives: This study aims to assess the impact of international trade measurements, trade liberalization, and other related variables on the Female Labor Force Participation (FLFP) and Female Employment (FE) in the agricultural, industrial, and services sectors in Jordan from 1990 to 2019.

Methods: The study adopts four models and uses the Fully Modified Ordinary Least Square (FMOLS) approach to estimate the effects of International Trade (Trade), Gross Domestic Product per Capita (GDPC), Live Births (LB), Female Enrollment in Secondary School (EFSS), Female Unemployment (FUN), and Jordan’s Accession to the WTO on the FLFP and FE in the three sectors.

Results: The empirical results indicate that international trade measurements, Jordan’s WTO accession, EFSS, and FUN have a significantly negative impact on FLFP, except for GDPC which reveals a positive impact on FLFP, while LB proves to be insignificant. Different results were obtained in terms of Female Employment (FE) in the three economic sectors. The trade measurements hurt FE in the agricultural and services sectors, and a positive impact on the industrial sector.

Conclusions: One of the most intriguing findings of this study is that Female Employment (FE) in Jordan has experienced adverse impacts due to increased trade openness. Consequently, the government must pursue policies promoting trade openness without adversely affecting FE. This can be achieved by enhancing Female Labor Force Participation (FLFP) through education and training initiatives. Simultaneously, there is a need to consider revising labor laws and regulations. These revisions should unequivocally prohibit gender-based wage discrimination.

Coronavirus Pandemic Impact on Arabian Securities Markets Performance

Khaled L. Al-Naif — Mon, 01 Jan 2024 00:00:00 +0100

Objectives: The study aims to assess the impact of the World Health Organization's declaration of COVID-19 as a global pandemic on the performance of Arab financial markets and to determine whether there is a difference in this impact among these markets. The study sample includes nine financial markets: the Saudi Stock Exchange, the Egyptian Stock Exchange, the Muscat Securities Market, the Abu Dhabi Securities Exchange, the Bahrain Bourse, the Qatar Stock Exchange, the Kuwait Stock Exchange, the Tunis Stock Exchange, and the Casablanca Stock Exchange.

Methods: To achieve the study's objectives, an event study methodology was employed, covering t_-400 trading days before the announcement and t₄₀₀ after it. T-tests and the equal-means test were also used. Daily closing price data for the indices of these markets were collected from their official websites and the Mubasher website.

Results: The study found a negative impact of the announcement on the performance of Arab financial markets, represented by the cumulative abnormal negative returns of these markets' indices. The study also identified differences in the impact of this pandemic among the markets.

Conclusions: The study emphasizes the importance of enhancing cooperation among Arab financial market authorities to serve the interests of these markets. It also underscores the necessity of further studies on this topic, especially since the crisis is over.