The Impact of Selected Macroeconomic Variables and FDI on Foreign Trade in Jordan for the Period (2010-2020)

Abstract

Unit Root and Cointegration tests as well as autoregressive distributed lag (ARDL) are used in this study to assess how selected macroeconomic variables and foreign direct investment (FDI) impact foreign trade (FT) of Jordan for the period (2010-2020). The automatic (ARDL) (E-view) method was used to assess the long-run relationship between the variables, represented in GDP, inflation rate (INFR), interest rate (IR), and FDI as independent variables, and international trade as a dependent variable. Study findings showed a positive and significant relationship between selected macroeconomic factors and direct investment in foreign commerce. This suggests that an increase in FDI by 1% results in a (0.13%) increase in foreign commerce provided that all other conditions remain constant. Gross domestic product (GDP) and foreign trade (FT) have a statistically significant positive association. The association between inflation rate (INFR), interest rate (IR), and international trade are negative and statistically significant. According to the data modified R-square (option R2) amounted to (84.2%), means that independent variables account for (84.2%) of the variation in GDP shares derived from international trade.