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Monetary Policy and the Central Bank in Jordan

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  • Samar Maziad
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    Abstract

    The Central Bank of Jordan (CBJ) and its operational independence changed over time in line with the evolution of the monetary policy framework and as a result of the currency crisis in the late 1980s. The paper examines the developments of the CBJ, its independence in conducting monetary policy and the various instruments at its disposal, with special focus on the certificates of deposit (CDs) market, the main monetary policy instrument, and the treasury bill market. The paper also examines the issue of the autonomy of monetary policy in Jordan given the influence of world interest rates. Although, Jordan operates an exchange rate peg, which has been fixed to the USD since 1995, there is some room for flexibility in operating monetary policy in the short-run, where the CBJ has some autonomy in determining the spread between domestic and US interest rates. VAR and VECM results suggest that the response of the policy rate in Jordan to innovations in the US Federal Fund''s rate is less than one-for-one. In the short-run, the CBJ appears to conduct monetary policy in response to domestic inflation and a measure of the domestic output gap.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 09/191.

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    Length: 29
    Date of creation: 01 Sep 2009
    Date of revision:
    Handle: RePEc:imf:imfwpa:09/191

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    Keywords: Central bank autonomy; Central bank role; Economic models; Exchange rate regimes; Monetary policy instruments; monetary policy; inflation; central bank; monetary framework; monetary fund; money supply; monetary policy independence; monetary conditions; foreign currency; monetary independence; government securities; discount rate; foreign exchange; price stability; monetary policy framework; monetary policy autonomy; inflationary pressures; tight monetary policy; reserve requirements; reserve ratios; monetary policy instrument; liquidity management; monetary stability; independent monetary policy; monetary institutions; monetary frameworks; low inflation; post-crisis period; inflationary expectations; demand for government securities; treasury bonds; monetary policy operations; real interest rates; monetary transmission; monetary stance; gold reserves; monetary management; real interest rate; inflation targeting framework; inflation targeting; monetary policies; inflation rate; domestic monetary policy; reduction of inflation; money growth; monetary transmission mechanism;

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    Cited by:
    1. Mohaddes Kamiar & Raissi Mehdi, 2013. "Oil Prices, External Income, and Growth: Lessons from Jordan," Review of Middle East Economics and Finance, De Gruyter, vol. 9(2), pages 99-131, August.

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