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The Impact of the Fiscal and Quantitative Monetary Policies on the Domestic and Foreign Direct Investment in Jordan: An Empirical Study

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  • Ateyah M. Alawneh
  • Torki M. Al-Fawwaz
  • George N. Shawaqfeh

Abstract

The study aims to demonstrate the impact of fiscal and the quantitative monetary policy on the domestic and Foreign Direct Investment in Jordan during the period (2000-2011), where the study used two models, the first model is to assess the impact of the fiscal and quantitative monetary policy on the domestic investment, the study found that there is a negative relationship between the re-discount rate and the domestic investment, but not statistically significant, while there is a positive relationship with a statistically significant between the mandatory cash reserve and domestic investment, due to the presence of excess cash reserves at banks in Jordan. The study also showed a negative relationship between taxes and domestic investment, and a positive relationship between governmental capital spending and the domestic investment, this means the political effectiveness of the fiscal impact is greater than the monetary policy effectiveness on the domestic investment. The second sample demonstrates the impact of the fiscal policy and the quantitative monetary on Foreign Direct Investment, The study showed that there a presence of a statistically significant negative relationship between the rediscount rate and Foreign Direct Investment, while it showed a positive relationship between taxes and Foreign Direct Investment, the reason is that the government grant a tax exemptions to encourage Foreign Direct Investment.

Suggested Citation

  • Ateyah M. Alawneh & Torki M. Al-Fawwaz & George N. Shawaqfeh, 2015. "The Impact of the Fiscal and Quantitative Monetary Policies on the Domestic and Foreign Direct Investment in Jordan: An Empirical Study," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 5(4), pages 1-10, October.
    • Handle: RePEc:hur:ijaraf:v:5:y:2015:i:4:p:1-10
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    References listed on IDEAS

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    1. Rashmi Banga, 2003. "Impact of government policies and investment agreements on FDI inflows," Indian Council for Research on International Economic Relations, New Delhi Working Papers 116, Indian Council for Research on International Economic Relations, New Delhi, India.
    2. Tobias Olweny & Mambo Chiluwe, 2012. "The Effect of Monetary Policy on Private Sector Investment in Kenya," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 2(2), pages 1-9.
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    Cited by:

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    2. Thuy T. Dang & Anh D. Pham & Diem N. Tran, 2020. "Impact of Monetary Policy on Private Investment: Evidence from Vietnam’s Provincial Data," Economies, MDPI, vol. 8(3), pages 1-15, September.
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