Research Article Open Access

DETERMINANTS OF INFLATION IN JORDANIAN ECONOMY: FMOLS APPROACH

Abstract

The current study assesses the determinates of inflation in Jordanian economy over the period 2000:1 to 2017:4, by using quarterly data on inflation, money supply, interest rate, credit, oil price and the output gap. Fully Modified Ordinary Least Square (FMOLS) approach was applied. The empirical findings of the present study showed that money supply, credit and oil price variables have a positive and significant impact on inflation in Jordanian economy, while the interest rate and output gap have an adverse and significant effect on the inflation in Jordanian economy. The impulse response functions and variance decomposition analysis test were used. Both tests have showed that the inflation in Jordanian economy mostly explained by oil price in the long run which indicated that the supply side is persisted inflation in Jordan economy.

RADI M ADAYLEH

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