In any economy, the financial sector plays a fundamentally important role in achieving economic growth and thus achieving sustainable economic development. Therefore, interest in this sector and the improvement of its performance is considered a strategic goal for any country. Accordingly, this study aims to analyze the short-and long-run impacts of inflation on the development of this sector on the Jordanian economy for the period from 1993 to 2018. To do so, the study uses an auto-regressive distributed lag bound testing approach, which is considered an advanced analytical model. Empirical findings confirmed that there is a statistically significant long-and short-run negative effect of inflation on financial sector development. On the contrary, there is a statistical significant long-and short-run positive impact of economic growth on financial sector performance. In addition, results confirmed that there is a positive support of the previous financial sector policies on financial sector performance in the current period.
The improved performance of the financial sector through its process of financial intermediation between savers and investors and between lenders and borrowers as well as the guidance of the funds those are available to the optimal investments lead to achieve the desired stable economic growth. Economists generally believe that high rates of inflation cause problems to some individuals and as well as for the whole economic performance. In general, low inflation rate with financial sector development plays a crucial and essential role in achieving sustained and stable economic growth. Therefore, maintaining inflation rate at low level and improving the financial sector performance are considering themain targets for policy makers to promote sustained and stable economic growth. So, the main purpose of this paper was to investigate empirically the relationship between inflation and financial sector development in Saudi Arabia for the period of 1982-2013.This paper used the autoregressive distributed lag (ARDL) bound testing approach suggested by Perasan et al. (2001) to examine the existence of the long-run relationship between the inflation rate and financial sector development. The advantage of the bounds testing approach is in its applicability irrespective of whether the underlying variables are purely I (0), purely I (1) or mutually co-integrated.All data were tested for stationarity using Augmented Dickey-Fuller (ADF) test and the Phillip-Perron (PP) test to determine the order of integration. The variables included in this study are: The credit to the private sector as percentage of GDP was used as a proxy of financial development and inflation rate measured by the consumer price index. The study also included two more control variables: trade openness and real gross domestic product. The main findings are as follows. First, tests results of the Augmented Dickey-Fuller (ADF) and Phillips – Perron (PP) showed that consumer price index (LCPI), real gross domestic product (LGDP) and trade openness (LOPEN) did not seem to be stationary at their level but they were at first difference. Accordingly, they were integrated of order one I (1). On the other side, both tests results of financial development (LFD) seemed to be stationary at its level. Accordingly, it was integrated of order zero I (0). Second, results showed that there was a statistically significant long-and-short run negative relationship between inflation and financial development. Third, there was statistically significant positive impact of previous financial sector’s policies on financial sector development.Forth, results indicated that there was statistically significant positive impact of economic growth on financial development. Fifth, there was a statistically significant negative impact of trade openness on financial development.Accordingly, inflation and trade liberalization policy are the main obstacles facing financial sector performance. Therefore, the policy makers can reduce inflation through the use of appropriate fiscal and monetary policies.
This paper investigates empirically the relationship between stock market prices and house prices in Saudi Arabia. Using yearly data for the period from 1985 to 2012 we conducted a Granger-causality test, Impulse response functions and Variance decompositions that were simulated from the estimated unrestricted vector autoregressive (VAR). Results suggest that stock market and economic growth play a major role in determining house prices. Granger causality results show that stock market prices and the economic growth have a causal impact on house prices. Impulse response functions indicate there is a negative relationship between stock market prices and house prices and also there is a positive relationship between economic growth and house prices. Variance decompositions show that the stock market prices is the most important variable that explains the variation of house prices, followed by economic growth.
Internal (firm-specific) and external (macroeconomic) determinants of stock price fluctuations are vital for investors seeking to invest their money in a firm’s stocks. Thus, the main aim of this study is to explore macroeconomic and firm-specific factors that influence stock price fluctuations for all conventional banks in Jordan in 2010–2019. Ordinary least squares multiple regression (panel data) is applied for data analysis. The results report that trading volume (TV), dividend yield (DY), and Gross Domestic Product (GDP) have a positive effect on stock price volatility, while stock price volatility is statistically negatively affected by return on assets (ROA), dividend payout ratio (DPR), and price-earnings ratio (PE). On the other hand, money supply (MS) does not affect stock price volatility. Paying more dividends can reduce stock risk and, in turn, reduce stock price volatility. The findings can benefit current and potential investors, firm managers, brokers, dealers, portfolio managers, regulatory bodies, policy makers, and researchers.
Financial market has a close relationship with economic growth because increasing economic growth, representing the real gross domestic product (GDP), will enhance the efficiency and develop the stock market. On the other hand, the good performance of the stock market will affect economic growth positively. This paper aims to investigate the impact of stock market performance on the economic growth of a group of MENA countries during the time period 2000–2019. This study uses unbalanced panel data, unit root test, co-integration test, and autoregressive distributed lag (ARDL) model for data analysis (Kao, 1999; Pesaran, Shin, & Smith, 2001). The findings report that the stock market index, banking sector development, the ratio of foreign direct investment (FDI) to the GDP, and the consumer price index, as a proxy of inflation, have a significant positive long-run effect on the economic growth, while the ratio of broad money supply (M2) to the GDP has a significant negative long-run effect on the economic growth. The policymakers and government can based on the results of the study in developing and adopting policies to improve and enhance the efficiency of the stock market and attracting new investors inside and outside the country, which results in increasing the economic growth.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.
hi@scite.ai
10624 S. Eastern Ave., Ste. A-614
Henderson, NV 89052, USA
Copyright © 2024 scite LLC. All rights reserved.
Made with 💙 for researchers
Part of the Research Solutions Family.