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Slowdown of Credit Flows in Jordan in the Wake of the Global Financial Crisis; Supply or Demand Driven?

  • Tigran Poghosyan

This paper estimates a disequilibrium model of credit supply and demand to evaluate the relative role of these factors in the slowdown of credit flows in the Jordanian economy in the wake of the global financial crisis. The empirical analysis suggests that the credit stagnation is mainly driven by the restricted credit supply amid tighter monetary policy conditions in Jordan relative to the United States, as evidenced by the widened interest differential between the Central Bank of Jordan (CBJ) re-discount and the U.S. Federal Reserve funds rates. Although it appears that demand side factors related to the slowdown of economic activity have also had an impact, their role has been relatively modest. The estimation results imply that economic policies targeted towards stimulating supply of credit are likely to be a more effective tool for expanding credit flows relative to demand stimulating policies.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 10/256.

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Length: 15
Date of creation: 01 Nov 2010
Date of revision:
Handle: RePEc:imf:imfwpa:10/256
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  1. P.R. Agenor & J. Aizenman & A. Hoffmaister, 2000. "The Credit Crunch in East Asia: What can Bank Excess Liquid Assets Tell us?," NBER Working Papers 7951, National Bureau of Economic Research, Inc.
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