The Effect of Fiscal and Monetary Policy on Private Investment in Jordan by Using Time Series Analyses

Abstract

the aim of this research to a statement of the impact of each financial and monetary policy on private investment in Jordan during the period (1980 - 2014), aims to assess the relationship between private investment and a group of influential factors such as (gross domestic product (GDP), money supply , direct taxation, government spending, and the interest rate) .To achieve this objective was the use of model VAR (Vector Auto Regression ) on variables study, has also been applied Unit Root Test to see whether the study variables stable, with the passage of time, showing that the gross domestic product (GDP), and government spending and money supply is stable at the second difference I(2), either private investment and the interest rate and direct taxation is stable at the difference I(1).And the application of the test of the choice of the number of periods of Lags during the testing of less than the value of the viable (Akaike and Schwartz)  where he found that the best number of years the slowdown is three years.The Granger test of causality with that there is a bidirectional relationship between private investment and government spending as well as between private investment and direct taxation any that each causing the other. And that there is a single trend between private investment and gross domestic product (GDP) and any that the gross domestic product (GDP) cause private investment. And that there is a single trend between private investment and any criticism that the presentation of the money supply cause private investment. There is a causal relationship in any direction between the interest rate and private investment.It was also the use of the two main instruments for analysis: analysis of the components of the variance a respond to the backlash of the Act. It was found that all of the gross domestic product (GDP) and IMF and government spending and direct taxation positively affects primarily. Either the interest rate affect negatively on private investment in Jordan, this is consistent with the Economic Theories previous studies and discussed in the relevant subject. The study recommends that the need for the use of monetary policies and finance including offers an investment climate to encourage investment.