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The Relationship between Real and Banking Sectors in Jordan

Author

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  • Alawin, M.
  • Al-Muhaissen, T.
  • Merza, E.

Abstract

This paper investigates the interrelation between real side and banking side in Jordan,using real GDP as an indicator for the real side, changing in private debt and capital adequacy index as indicators for the banking side for the period 1980-2011. The results indicate that there is a positive relationship between the two sides in the short run. Impulse Response Function (IRF) verified that changing in the private debt affects RGDP significantly, suggesting that the banking side affects the real side. Also, the IRF verified that capital adequacy index affects RGDP, suggesting that the strength of banking system also affects the real side too.

Suggested Citation

  • Alawin, M. & Al-Muhaissen, T. & Merza, E., 2013. "The Relationship between Real and Banking Sectors in Jordan," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 13(2), pages 129-134.
    • Handle: RePEc:eaa:aeinde:v:13:y:2013:i:2_17
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    References listed on IDEAS

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    1. Stefano Puddu, 2013. "Real Sector and Banking System: Real and Feedback Effects. A Non-Linear VAR Approach," IRENE Working Papers 13-01, IRENE Institute of Economic Research.
    2. Jokipii, Terhi & Monnin, Pierre, 2013. "The impact of banking sector stability on the real economy," Journal of International Money and Finance, Elsevier, vol. 32(C), pages 1-16.
    3. Ilkay Sendeniz-Yuncu & Levent Akdeniz & Kursat Aydoğan, 2008. "Interdependence of the banking sector and the real sector: evidence from OECD countries," Applied Economics, Taylor & Francis Journals, vol. 40(6), pages 749-764.
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    Cited by:

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