Slowdown of Credit Flows in Jordan in the Wake of the Global Financial Crisis : Supply or Demand Driven?

Author/Editor:

Tigran Poghosyan

Publication Date:

November 1, 2010

Electronic Access:

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Summary:

This paper estimates a disequilibrium model of credit supply and demand to evaluate the relative role of these factors in the slowdown of credit flows in the Jordanian economy in the wake of the global financial crisis. The empirical analysis suggests that the credit stagnation is mainly driven by the restricted credit supply amid tighter monetary policy conditions in Jordan relative to the United States, as evidenced by the widened interest differential between the Central Bank of Jordan (CBJ) re-discount and the U.S. Federal Reserve funds rates. Although it appears that demand side factors related to the slowdown of economic activity have also had an impact, their role has been relatively modest. The estimation results imply that economic policies targeted towards stimulating supply of credit are likely to be a more effective tool for expanding credit flows relative to demand stimulating policies.

Series:

Working Paper No. 10/256

Subject:

English

Publication Date:

November 1, 2010

ISBN/ISSN:

9781455209569/1018-5941

Stock No:

WPIEA2010256

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

15

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