The relative effectiveness of monetary and fiscal policies in developing countries : an error correctionmechanism (ECM)‎

الملخص EN

This paper investigates the relative importance of monetary and fiscal policies for Jordan.

Unlike previous studies, a vector error correction model is applied on St.

Louis-type reduced form equation.

Analysis of the unit roots tests.

Johansen cointegration test, and the Granger causality results based on the joint F-tests are utilized.

The analysis is undertaken with annual data spanning over thirty lour years in logarithms form from 1970 until 2003.

It turns out.

that fiscal policy has stronger effect than monetary policy has on economic activity, whence fiscal policy can be utilized as a stabilization policy in Jordan.