The impact of government budgetary borrowing on credit to the private sector has always been an important subject, especially in developing countries. Within this context, it is interesting to note that total public debt in Jordan has increased from 67% of GDP in 2010 to 93.5% by the end of 2018.
The objectives of this paper are three-fold: First, to examine the impact of local public debt on local credit to the private sector (quarterly data during the period 2004-2017). To examine the impact of budget deficit on local credit to the private sector (quarterly data during the period 2004-2017). Third, using bank-level data (2009-2016), to examine the impact of Jordanian commercial banks’ investments in government securities on their lending / credit activity.
Based on the empirical findings, it is concluded that the impact of local public debt on private sector credit is negative. There is a crowding out effect. Also, the impact of the budget deficit on private sector credit is negative. Finally, banks that invest a larger percentage of their assets in government securities than others, tend to lend less to the private sector.
Based on the results, a number of recommendations are put forward including that the government must re-examine its public finances and come up with some remedial measures. Naturally, these measures must consider both the Public Spending Aspect and the Public Revenues Aspect.
| First name | Last name | Gender | Rank | Affiliated Institution | Country |
|---|---|---|---|---|---|
| Ghassan | Omet | Male | Full Professor | Jordan Strategy Forum | Jordan |
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Bio: Director of the Research Department at the Jordan strategy Forum, a full professor at the Department of Finance / University of Jordan where he has been since 1991. Ghassan received a BA (Economics) from Essex University. MA from University of Liverpool, and a PhD in Finance from Brunel University in 1990. During his career, Professor Omet held several posts including Dean of Economics and Dean of Academic Research. He is the author of many peer-reviewed publications and numerous conference papers. His research focuses on pricing and operational efficiency of stock markets, financing of listed and family firms, financial development, and bank performance. |
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Scientific field
Economics
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Start Year2018
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End Year 2018
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| Funding Agency | Funding Agency Type | Country of Funding Agency |
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| Self-financed | Private | Jordan |
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