The Impact of Domestic Savings Gap on the Current Account Balance in Jordan during the Period (1995-2020)

Abstract

The study aims to demonstrate the role of the domestic savings gap in the Current Account (CA) balance in Jordan, by analyzing the size and development of the domestic savings gap in Jordan. As well as analyzing the role of domestic savings in the CA, and balance in Jordan. Auto Regressive Distributed Lag (ARDL) and Bound Testing methodology were used to measure the short and long-term impact of deficit determinants in the CA of the Jordanian balance of payments. Several results were found in the current study. First, a positive and significant effect of the public savings gap on the CA deficit in Jordan was found during the period 1995 to 2020. Second, a positive and significant effect of the private sector savings gap on the CA in Jordan during the study period. Finally, the government sector’s gap has a greater impact compared to the private sector's gap on the CA in Jordan. The study recommends the necessity of drawing up incentive policies for domestic savings and creating incentives and means that can help increase the mobilization and distribution of savings to finance productive investments to reduce the CA deficit in Jordan.