IDEAS home Printed from https://ideas.repec.org/a/mes/emfitr/v40y2004i6p82-94.html
   My bibliography  Save this article

Real Interest Rates and Productivity Shocks : Why Are Business Cycles Negatively Correlated Between the European Union and Jordan?

Author

Listed:
  • BERND LUCKE

Abstract

Why is there a negative correlation between business cycles in Jordan and the EU15? This paper explores the hypothesis that total factor productivity (TFP) increases in Europe spill over to Jordan only if embodied in foreign direct investment, but that European TFP growth negatively affects the Jordanian economy through higher world interest rates. This unambiguously lowers Tobin's q and has a negative income effect if net foreign asset holdings are negative. A dynamic stochastic equilibrium business cycle model is used to quantify the importance of this transmission channel. Simulations with observed exogenous impulses suggest a reasonably good performance of the model economy, but real interest rate shocks alone are too weak to account for the negative correlation. However, in conjunction with oil price-related shocks to transfers and the government share, the puzzle may be resolved.

Suggested Citation

  • Bernd Lucke, 2004. "Real Interest Rates and Productivity Shocks : Why Are Business Cycles Negatively Correlated Between the European Union and Jordan?," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 40(6), pages 82-94, November.
    • Handle: RePEc:mes:emfitr:v:40:y:2004:i:6:p:82-94
    as

    Download full text from publisher

    File URL: http://mesharpe.metapress.com/link.asp?target=contribution&id=XKRTUVDG9GDU0JL8
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Inda Mulaahmetovic, 2022. "Evaluating the Effectiveness of Quantitative Easing Measures of the Federal Reserve and the European Central Bank," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 12(3), pages 141-163.
    2. Hideaki Hirata & Sunghyun Henry Kim & M. Ayhan Kose, 2007. "Sources of Fluctuations: The Case of MENA," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 43(1), pages 5-34, February.
    3. Poghosyan, Tigran, 2011. "Slowdown of credit flows in Jordan in the wake of the global financial crisis: Supply or demand driven?," Economic Systems, Elsevier, vol. 35(4), pages 562-573.
    4. Balcilar, Mehmet & Bagzibagli, Kemal, 2010. "Sources of Macroeconomic Fluctuations in MENA Countries," MPRA Paper 44351, University Library of Munich, Germany.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mes:emfitr:v:40:y:2004:i:6:p:82-94. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/MREE20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.