Analyzing The Impact of Public Debt and Capital Expenditure on Gross Domestic Product (GDP): A Case Study of The Jordanian Economy (2008-2024)

Abstract

This study investigates how domestic and external public debt, together with capital expenditure, have shaped the trajectory of Jordan’s gross domestic product (GDP) from 2008 to 2024. Considering Jordan’s ongoing exposure to external shocks and deep-seated structural vulnerabilities, the analysis highlights the pivotal role of fiscal policy in steering macroeconomic outcomes and fostering long-term stability, particularly during periods of pronounced economic volatility. As a relatively small and structurally open economy, Jordan remains highly dependent on imported energy, making it especially susceptible to both domestic and external shocks. Elevated public debt—measured both in absolute terms and as a share of GDP—further amplifies the country’s vulnerability to regional geopolitical and economic instability. Nevertheless, the government has pursued a series of policy reforms designed to improve the effectiveness of public debt management and capital expenditure in supporting sustainable growth. In addition, public debt management and capital expenditure effectiveness are closely linked to government accounting practices and fiscal transparency. Proper classification and monitoring of debt instruments can reduce fiscal risks and support long-term macroeconomic sta-bility. The econometric analysis, conducted using EViews (2009), provides evidence of cointegration among the variables. This indicates that, over time, short-term fluctuations in public debt and capital investment can contribute to correcting long-term imbalances in real GDP.