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

November 1, 2010

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Format: Chicago

Tigran Poghosyan. Slowdown of Credit Flows in Jordan in the Wake of the Global Financial Crisis: Supply or Demand Driven?, (USA: International Monetary Fund, 2010) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

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.

Subject: Bank credit, Banking, Central bank policy rate, Credit, Financial crises, Financial markets, Financial services, Global financial crisis of 2008-2009, Money, Stock markets

Keywords: Bank credit, Central bank policy rate, Credit, Credit crunch, Credit demand, Credit supply, Credit supply and demand function, Demand equation, Disequilibrium credit market model, Financial crisis, Global, Global financial crisis of 2008-2009, Jordan, Plotted credit supply and demand series, Rate, Stock markets, Supply equation, WP

Publication Details

Pages:

15
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2010/256
Stock No:

WPIEA2010256
ISBN:

9781455209569
ISSN:

1018-5941

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