Abstract
Abstract. Monetary policy is one of the important monetary subjects that can evaluate the performance of the policy and its tools, recent development in financial markets in the past years led to changes in the behavior of countries monetary policies, concentrated to achieve stability in the price level by creating new ideas of how monetary policy affects the economy and its components through linking macroeconomic activities (private spending components) with nominal interest rate. This study aims to analyze and evaluate the impact of Jordanian monetary policy on consumption and investment spending during the period (1989-2013) to predict the impact of monetary policy and its instruments on real economic activities and inflation. The study finds that lending rate affects investment negatively but it does not affect consumption and real GDP in the short run. However, in the long run investment is affected by the co-movements occurred in consumption lending rate and lagged investment. Also, the study finds that real GDP is affected by the co- movements that occurred in real GDP and lending rate. Furthermore, domestic credit is affected by the co-movements that happened in domestic credit and lending rate.
Keywords. Consumption, Error correction model, Investment, Lending rate, Monetary policy.
JEL. E20, F22, O23.
References
Aban M.J.A.C. (2013). Transmission of monetary policy through the bank lending channel in the Philippines. International Journal of Trade, Economics and Finance. 4(1), 37-42. doi: 10.7763/IJTEF.2013.V4.257
Ando A,. & Modigliani, F. (1963). The life cycle hypothesis of saving: aggregate implications and tests. American Economic Review. 53(1), 55–84.
Bernanke B.S., & Gertler, M. (1995). Inside the black box: the credit channel of monetary policy transmission. Journal of Economic Perspectives. (9)4, 27-48.
Bernanke, B., Gertler, M., & Gilchrist, S. (1999). The financial accelerator in a quantitative business cycle framework. NBER Working Paper Series, No. 6455, doi: 10.3386/w6455
Besink, F., & Zeqiri, I. (2010). The impact of monetary policy and exchange rate regime on Real GDP and prices in the Republic of Macedonia, Economic and Business Review. 12(4), 263–284.
Blinder A.S,. & Stieglitz, J.E. (1983). Money, credit constraints, and economic activity. American Economic Review. 73(2), 297–302.
Boivin J., Kiley, M.T., & Mishkin, F.S. (2010). How has the monetary transmission mechanism evolved over time. NBER Working Paper Series, No.15879. doi: 10.3386/w15879
Clarida, R., Galí, J., & Gertler, M. (2000). Monetary policy rules and macroeconomic stability: evidence and some theory. Quarterly Journal of Economics, 115: 147-180 doi: 10.1162/003355300554692
Davoodi, H.R., Dixit, S.V.S., & Pinter, G. (2013). Monetary transmission mechanism in the East African Community: An Empirical Investigation. International Monetary Fund (IMF) Working Paper, No. 13-39.
Devereux, M.B., Engel, C., & Storgaard, P.E. (2004). Endogenous exchange rate pass through when nominal pries Set in advance. NBER Working Paper Series, No.9543, doi: 10.3386/w9543
European Central Bank. (2002). Recent findings on monetary policy transmission in the euro area. Monthly Bulletin, October. 8-174
Horvath, B., & Maino, R. (2006). Monetary transmission mechanism in Belarus. International Monetary Fund, Working Paper Series, No. 06/246.
Kamin, S., Turner, P., & Dack, J.V. (1998). The transmission mechanism of monetary policy in emerging market economies: an overview. in The Transmission of Monetary Policy in Emerging Market Economies, BIS Policy Papers, No.3. pp.5-64.
Kara, H., & Ogunc, F. (2005). Exchange rate pass-through in Turkey: It is slow, but is it really low. Central Bank of Turkey, Working Paper, No. 05/10.
Kuttner, K.N., & Mosser, P.C. (2002). The monetary transmission mechanism: some answers and further questions. Federal Reserve Bank of New York. Economic Policy Review. 1, 15-26
Matteo, C., Maddaloni, A., & Peydro, J. (2013). Heterogeneous transmission mechanism Monetary policy and financial fragility in the Euro area. European Central Bank (ECB) Working Paper, No.1527. doi: 10.1111/1468-0327.12015
Mishkin, F.S. (1995). Symposium on the monetary transmission mechanism. Journal of Economic Perspectives. (9)4, 3-10. doi: 10.1257/jep.9.4.3
Mohanty, M.S. & Turner, P. (2008). Monetary policy transmission in emerging market economies: what is new. BIS Papers, No.35.
Mwabutwa, C., Bittencourt, M., & Viegi, N. (2013). Evolution of monetary policy transmission mechanism in Malawi: A TVP-VAR Approach. University of Pretoria, Department of Economics, Working Paper Series, No: 2013/27.
Oksana, D., Tomasz, L., Przystupa, J., Sznajderska, A. & Wrobel, E. (2012). Monetary policy transmission mechanism in Poland. What do we know in 2011. National Bank of Poland. 116, 1-65
Sadia, S., & Azra, K. (2013). Financial innovation and monetary policy transmission Mechanism in Pakistan. International Journal of Development and Sustainability. 2(1), 390-397.
Tushar Poddar, T., Sab, R., & Khachatryan, H. (2006). The monetary transmission mechanism in Jordan. International Monetary Fund, Working Paper Series, No. 06/48.
Zams, B.M., Cooray, N.S. (2007). Economic analysis of the exchange rate channel and monetary policy rule: The case of Indonesia. International University of Japan Papers.
