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Current Account Balance, Inflation, Industry And Sustainable Development In Jordan

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  • Mohammad ALAWIN
  • Mohammad OQAILY

Abstract

The study aims at measuring the impact of the current account on inflation in Jordan. In order to achieve that goal, the study presents theoretical and econometric framework for an economic model that includes the determinants of inflation where current account deficit is one of them. The study finds out that the increase in current account deficit affects domestic inflation negatively in the long run. This result would be attributed to the fact that current account deficit absorbs big part of the excess in the domestic demand, in addition to the long run flexibility of the economy to produce substitutes for imported goods. However, in the short run, it was found that current account deficit affects domestic inflation positively. It was found that for this period there is no enough flexibility for the Jordanian economy to produce enough goods to substitute imports, which leads to inflation.

Suggested Citation

  • Mohammad ALAWIN & Mohammad OQAILY, 2017. "Current Account Balance, Inflation, Industry And Sustainable Development In Jordan," Revista Galega de Economía, University of Santiago de Compostela. Faculty of Economics and Business., vol. 26(3), pages 45-56.
    • Handle: RePEc:sdo:regaec:v:26:y:2017:i:3_4
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    File URL: https://revistas.usc.gal/index.php/rge/article/view/4459
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    References listed on IDEAS

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    6. Granger, Clive W J, 1986. "Developments in the Study of Cointegrated Economic Variables," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(3), pages 213-228, August.
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    Cited by:

    1. Tamer Rawashdeh & Mahmoud Al-Rdaydeh & Basem Hamouri, 2020. "The Effect of International Currency Crises on the Balance of Payments: Evidence From Jordan," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(5), pages 275-284, October.

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    More about this item

    Keywords

    Current Account; Inflation; trade balance; Jordanian economy.;
    All these keywords.

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • F10 - International Economics - - Trade - - - General

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