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Remittances and Real Investment in Jordan: Is There a Link? An Empirical Investigation

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  • Ghazi Al-Assaf
  • Alaaeddin Al-Tarawneh

Abstract

The study attempts to test the long-run equilibrium relationships between the flows of workers’ remittances, andreal investment.Using Jordanian data, over the period 1976 to 2012, the empirical results provide strong evidence on the presence of a long-run stable investment function. In the short-run, remittances has a positive and significant effect on the real investment; a consistent result with the literature. Therefore, the results confirm the significant impact of worker’s remittances on the real investment found in the previous literature using a cointegration technique. Both Engle-Granger and Johansen cointegration tests show that real investment and remittances are cointegrated and there is clear evidence on the presence of a long-run relationship among them in Jordan. This is based on the statistical significance of the coefficient of the error correction term. The estimated coefficient is -0.545 and statistically significant with the anticipated negative sign, which indicates that the speed of adjustment to equilibrium in the long-run is relatively high. This finding emphasises the importance of the flows of remittances to labour-exporting countrieson the real investment especially in the case of Jordan.

Suggested Citation

  • Ghazi Al-Assaf & Alaaeddin Al-Tarawneh, 2016. "Remittances and Real Investment in Jordan: Is There a Link? An Empirical Investigation," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot GmbH, Berlin, vol. 62(1), pages 69-84.
    • Handle: RePEc:dah:aeqaeq:v62_y2016_i1_q1_p69-84
    DOI: 10.3790/aeq.62.1.69
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