Financial liberalization and money supply in Jordan

Abstract EN

The aim of this paper is to investigate whether the financial liberalization program, launched in Jordan in the aftermath of the 1989 crisis, has had any effect on the controllability of the money supply by the Central Bank.

Recent failures of some of the banks in Jordan seem to point in this direction.

This observation seems to conform to the ongoing controversy surrounding the erogeneity / endogeneity theses regarding the money supply i.e the controllability/non-controllability of the money supply by the Central Bank.

To achieve this goal, several econometric tests are carried out, namely Unit Root, Co-integration and Granger Causality tests.

The results indicate that the money supply in Jordan is exogenously determined, which implies that it is under the control of the Central Bank.