The Relation between the Financial Market Development and Economic Growth in Jordan

Abstract

The purpose of this study is to examine the relationship between economic growth and financial market development in Jordan through the co-integration and error correction model between during the period 2000-2018. The study employs the error correction model to determine the short-run dynamics of the system and the cointegration test to examine the long-term relationship . The study is limited to a few variables, changes in real Gross domestic product GDP and the IMF indicator for financial market development . The results show that in the long-term there is a significant relationship between economic growth and financial market development for Jordan data., while in the short-term there is no statistically significant relationship between the stock market development and economic growth. Furthermore, causality is going from economic growth to financial market development, not vice versa.

Keywords: Economic Growth, financial market development, Amman stock market, IMF indicator.

DOI: 10.7176/JESD/10-14-12

Publication date:July 31^st 2020