Effects of the Jordanian dinar's devaluation on the balance of payment's major accounts

Abstract EN

-The main goal of this study is to analyze and measure the effects of the two consecutive devaluations of the Jordanian Dinar (JD) that occurred in 1988 and 1989 on the Jordanian balance of trade and balance of payments.

To achieve the objectives of the study a simultaneous balance of trade and balance of payments model is developed.

Annual time series data covering the period I974-I990 was collected and/or calculated.

The method of seemingly unrelated regression is used to estimate the model parameters.

The empirical analysis provides evidence in support of the following two important conclusions: 1.

Devaluation of the JD has little or no effects on the Jordanian Balance of trade.

2.

Devaluation of the JD has succeeded in bringing about net improvement in the Jordanian balance of payments.

One important implication of these results is that there are probably other better ways than devaluation to improve the balance of trade.

The estimation results suggest that direct monetary and/or fiscal policies are more effective in influencing the balance of trade.