Fiscal Policy Tools and Economic Growth in Jordan: Evidence from Time-Series Models

Abstract

This paper examines equilibrium relationships and dynamic causality analyses between economic growth and fiscal policy tools in Jordan for the (1978-2017) period. It employs autoregressive distributed lag and vector error correction models. The results suggest that there is evidence of a co-integration and causal relationships between economic growth and fiscal policy instruments. General government expenditures have long-run positive impact on economic growth, implying that general government expenditures improve economic growth. Moreover, total tax rates have long-run negative impact on economic growth, implying that a tax cut stimulates economic growth. These results are broadly consistent with similar studies carried out for other developing economies.