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The Impact of Bank Credit on Inflation in Jordan by Using Vector Auto Regression Model: A Case Study of Jordan during 1968-2017

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  • Suleiman Daood Al-Oshaibat
  • Hmood H. Banikhalid

Abstract

Previous studied revealed mixed results regarding the Banks have an influence on the inflation rate. This study aims at investigating the impact of the bank credit on the inflation rate in Jordan during the period 1968-2017 by using Vector Auto Regression Model (VAR) on the annual data. Necessary tests were conducted for this model such as Unit Root Test, Granger Causality Test, Variance Decomposition and Response Function analysis. The results reveal that there is a mutual effect between the bank credit and the inflation rate. Moreover the study states that there is an explanatory power of the bank credit in explaining the changes in inflations rates in Jordan. Namely, there is a positive effect of the credit bank on the inflation rate in Jordan.

Suggested Citation

  • Suleiman Daood Al-Oshaibat & Hmood H. Banikhalid, 2019. "The Impact of Bank Credit on Inflation in Jordan by Using Vector Auto Regression Model: A Case Study of Jordan during 1968-2017," International Business Research, Canadian Center of Science and Education, vol. 12(5), pages 34-39, May.
    • Handle: RePEc:ibn:ibrjnl:v:12:y:2019:i:5:p:34-39
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    References listed on IDEAS

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    1. Neelam Timsina, 2014. "Impact of Bank Credit on Economic Growth in Nepal," NRB Working Paper 22/2014, Nepal Rastra Bank, Research Department.
    2. Robert Engle & Clive Granger, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    3. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    4. Granger, C. W. J., 1988. "Some recent development in a concept of causality," Journal of Econometrics, Elsevier, vol. 39(1-2), pages 199-211.
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    Keywords

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    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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