The Role of Government Capital Expenditures in Economic Growth in Jordan

Abstract

This research aims at examining the role of government capital expenditures in economic growth in Jordan during the time period (1977-2016). The study collects the required data from the Central Bank of Jordan, the Department of Statistics, and the Ministry of Finance database. The analyzes is based on estimating the output as a function of input and control variables and analyzing the Gross Domestic Product (GDP) as a function of the total capital expenditures. The study found that first, the change in capital expenditures as a percentage of GDP has long-term equilibrium and has a short-term effect, but this result is unreliable due to model instability. Second, there is a short-term impact of net fixed capital formation and net tax on economic growth but there is no long-term equilibrium, and finally there is a short-term and long-term effect of government debt on economic growth. These findings can provide significant insights into many aspects of implementing policy in Jordan.