The Impact of Financial Deepening on Economic Growth in Jordan: Econometric Study (1980-2015)

Abstract

This study aimed to investigate the effect of financial deepening on the economic growth for the case of Jordan during the period of 1980-2016. To this end, the study used multiple econometric model based on Autoregressive Distribution Lag approach (ARDL) and co-integration analysis among the variables based on annual data. Philips-Perron (PP) test have been utilized for stationary test. The study results show that there is positive and significant effects between the financial deepening and economic growth when the amount of broad money supply/gross demostic product is used as proxy of financial deepening, and there are negative and significantly effects between financial deepening indicators were captured by interest rate spread, credit to the private sector, and negative insignificantly effects between commercial –central bank assests and economic growth. Based on the obtained results the study recommended to develop the  role of financial sectors to increase the degree of  financial deepening in the Jordanian economy, and directing the bank credit to the highly productive sectors, and reconsidering the interest rates on deposits and  loans to increase the financial deepening degree in the Jordanian economy.