Financial development in Jordan: Where do remittances play a role in bank credit?

• Main Authors: Yaseen, Hadeel, Omet, Ghassan
• Format: Article
• Language: English
• Published: Growing Science 2021-01-01
• Series: Accounting
• Online Access: http://www.growingscience.com/ac/Vol7/ac_2021_112.pdf

The Jordanian economy has been a recipient of huge amounts of remittances. Indeed, for more than a decade now, the inflow of this capital has been fluctuating around 10 percent of Gross Domestic Product (GDP). Within this context, the subject matter of remittances has resulted in the development of a myriad of research issues. One of these issues is the impact of remittances on financial development or bank credit to the private sector. This paper looks at the relationship between financial development and remittances in the Jordanian context. Based on the time period 1992-2019, and time series econometric techniques (co-integration and vector auto-regression, among others), this paper examines the impact of remittances on bank credit to the private sector, and on its main sectoral distributions. The estimated results reveal some interesting findings. There is no long-run stable relationship between bank credit to the private sector and remittances. However, there is a stable long-run relationship between credit to individuals (households) and remittances, and between credit to the construction sector and remittances. These conclusions imply that remittances, on average, promote private consumption in general, and residential spending.