Open AccessPublic Debt Management and Macroeconomics Policies Coordination: Evidence from Jordan
Author(s) -
Jumah Ahmad Alzyadat
Publication year - 2021
Publication title -
revista amazonía investiga
Language(s) - English
Resource type - Journals
ISSN - 2322-6307
DOI - 10.34069/ai/2020.36.12.5
Subject(s) - debt , economics , fiscal policy , variance decomposition of forecast errors , monetary economics , internal debt , debt to gdp ratio , monetary policy , government revenue , revenue , government debt , tax revenue , macroeconomics , public finance , finance , econometrics
This study aimed to analyze the effects of fiscal and monetary policies interactions on public debt in Jordan during (1970 – 2019). Using Vector Error Correction Model (VECM) derived from VAR (Vector Auto regression), and examine dynamic interactions between economic variables over time, by Appling Impulse Response Function, and Variance Decomposition. The results indicated that the fiscal policy instruments affect public debt in two different directions, the expansion of government expenditure positively affect public debt, while tax revenues reduce indebtedness. The monetary policy instruments affect public debt in the same directions, as the results indicated that the central bank in controlling money supply and managing interest rate helps the fiscal authority in reducing the public debt in Jordan. The results confirm the strongest impact of government expenditure on public debt in Jordan. The study recommends the necessity of rationalizing government expenditures and combating tax evasion. In addition, more coordination between fiscal and monetary policies.