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Output Responses to Shocks to Interest Rates, Inflation, and Stock Returns: Evidence from Jordan

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  • Al-Sharkas, A.A.

Abstract

This paper studies the dynamic relationship between the Jordanian output and other macroeconomics variables such as inflation, interest rate and stock returns. It employs the Vector Auto Regressive (VAR) approach method of Lee (1992) to analyze the relationship and dynamic interaction among variables. The Impulse Response Functions (IRF), and the Forecast Error Variance Decomposition (FEVD) from the VAR model are computed in order to investigate inter-relationships in the system. The results show that the response of output to shocks in stock returns is strongly positive up to the first 6 periods and after which the effect almost dies.

Suggested Citation

  • Al-Sharkas, A.A., 2004. "Output Responses to Shocks to Interest Rates, Inflation, and Stock Returns: Evidence from Jordan," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 4(3).
    • Handle: RePEc:eaa:aeinde:v:4:y:2004:i:1_22
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    More about this item

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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