The impact of monetary policy and tax revenues on foreign direct investment inflows: An empirical study on Jordan

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Mukhtarov S., Alalawneh M. M., Azizov M., Jabiyev F.

Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, vol.68, no.6, pp.1011-1018, 2020 (Scopus) identifier

  • Publication Type: Article / Article
  • Volume: 68 Issue: 6
  • Publication Date: 2020
  • Doi Number: 10.11118/actaun202068061011
  • Journal Name: Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis
  • Journal Indexes: Scopus, Academic Search Premier, CAB Abstracts, Central & Eastern European Academic Source (CEEAS), Veterinary Science Database, Directory of Open Access Journals
  • Page Numbers: pp.1011-1018
  • Keywords: Foreign Direct Investment (FDI), Jordan, Monetary policy, Tax revenues, VECM
  • Azerbaijan State University of Economics (UNEC) Affiliated: No

Abstract

The study examines the impact of monetary policy (proxied by money supply and interest rate) and tax revenue on foreign direct investment (FDI) in Jordan employing time series data period from 1991 to 2017. The Vector Error Correction Model (VECM), the Canonical Cointegrating Regression (CCR) and the Fully Modified Ordinary Least Squares (FMOLS) methods are applied in empirical estimations. Estimation results reveal that money supply has a positive and statistically significant impact on the FDI while, tax revenue has a negative impact on FDI in Jordan. Also, we find that the impact of interest rate is statistically insignificant. The results of current study are useful for the policymakers to formulate appropraite policies and support the literature for further researches in the case of developing economies.