{
  "title": "Oil Prices, External Income, and Growth: Lessons From Jordan",
  "publication": "IMF Working Papers, December 1, 2011",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/oil-prices-external-income-and-growth-lessons-from-jordan-25428",
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  "summary": "This paper extends the long-run growth model of Esfahani et al. (2009) to a labor exporting country that receives large inflows of external income?the sum of remittances, FDI and general government transfers?from major oil-exporting economies.",
  "sections": [
    {
      "heading": "Objective and Theoretical Framework",
      "content": "- Extends the long-run growth model of Esfahani et al. (2009) to a labor exporting country that receives large inflows of external income—the sum of remittances, FDI and general government transfers—from major oil-exporting economies.\n- The theoretical model predicts real oil prices to be one of the main long-run drivers of real output.\n- Identifies two long-run relationships predicted by theory:\n  - An output equation (long-run output relation).\n  - An equation linking foreign and domestic inflation rates."
    },
    {
      "heading": "Data and Empirical Approach",
      "content": "- Uses quarterly data between 1979 and 2009 on core macroeconomic variables for Jordan and a number of key foreign variables.\n- Employs co-trending restrictions, error correction terms, error-correction equations, and tests including LR statistic and multiple correlation coefficient.\n- Technical terms and methods referenced: Fisher equation, least squares, test statistics, error correcting relations, foreign output and inflation shocks."
    },
    {
      "heading": "Key Findings and Quantitative Results",
      "content": "- Long-run determinants of real output:\n  - Oil prices through their impact on external income and in turn on capital accumulation.\n  - Technological transfers through foreign output.\n- Empirical confirmation:\n  - A large share of Jordan's output volatility can be associated with fluctuations in net income received from abroad (remittances, FDI, general government transfers).\n- Cautions from empirical results:\n  - External factors cannot be relied upon to provide similar growth stimuli in the future."
    },
    {
      "heading": "Policy Implications and Recommendations",
      "content": "- It will be important to diversify the sources of growth in order to achieve a high and sustained level of income.\n- Implicit policy focus areas drawn from findings:\n  - Reduce dependence on oil-price-driven external income.\n  - Strengthen domestic capital accumulation mechanisms independent of external income volatility.\n  - Facilitate technological transfers and linkages to foreign output in ways that support domestic productivity."
    },
    {
      "heading": "Subject Areas and Keywords (as listed)",
      "content": "- Subject: Commodities, Foreign exchange, Inflation, National accounts, Oil, Oil prices, Personal income, Prices, Purchasing power parity\n- Keywords: co-trending restriction, error correction term, error correction term of the long-run output equation, error-correction equation, external income, Fisher equation, foreign direct investment, foreign output and inflation shocks and error correcting relations, Global, Growth models, Inflation, interest rate, Jordanian economy, least squares, long-run relations, LR statistic, multiple correlation coefficient, Oil, oil income, oil price shocks, Oil prices, output equation, Personal income, price boom, Purchasing power parity, remittances, test statistics, WP\n\n---\n\n Content in this bundle\n\n- wp11291 - References\n  - wp11291 - References (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp11291 - References (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/oil-prices-external-income-and-growth-lessons-from-jordan-25428"
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    "Authors: Mehdi Raissi, Kamiar Mohaddes",
    "Published: December 1, 2011",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781463927257.001",
    "Extends the long-run growth model of Esfahani et al. (2009) to a labor exporting country that receives large inflows of external income—the sum of remittances, FDI and general government transfers—from major oil-exporting economies.",
    "The theoretical model predicts real oil prices to be one of the main long-run drivers of real output.",
    "Identifies two long-run relationships predicted by theory:",
    "Uses quarterly data between 1979 and 2009 on core macroeconomic variables for Jordan and a number of key foreign variables.",
    "Employs co-trending restrictions, error correction terms, error-correction equations, and tests including LR statistic and multiple correlation coefficient.",
    "Technical terms and methods referenced: Fisher equation, least squares, test statistics, error correcting relations, foreign output and inflation shocks.",
    "Long-run determinants of real output:",
    "Empirical confirmation:",
    "Cautions from empirical results:",
    "It will be important to diversify the sources of growth in order to achieve a high and sustained level of income.",
    "Implicit policy focus areas drawn from findings:",
    "Subject: Commodities, Foreign exchange, Inflation, National accounts, Oil, Oil prices, Personal income, Prices, Purchasing power parity",
    "Keywords: co-trending restriction, error correction term, error correction term of the long-run output equation, error-correction equation, external income, Fisher equation, foreign direct investment, foreign output and inflation shocks and error correcting relations, Global, Growth models, Inflation, interest rate, Jordanian economy, least squares, long-run relations, LR statistic, multiple correlation coefficient, Oil, oil income, oil price shocks, Oil prices, output equation, Personal income, price boom, Purchasing power parity, remittances, test statistics, WP",
    "**_wp11291 - References**"
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