The Monetary Transmission Mechanism in Jordan

28 Pages Posted: 23 Mar 2006

See all articles by Tushar Poddar

Tushar Poddar

International Monetary Fund (IMF) - Middle East and Central Asia Department

Randa Sab

International Monetary Fund (IMF) - Middle East and Central Asia Department

Hasmik Khachatryan

International Monetary Fund (IMF)

Date Written: February 2006

Abstract

This paper examines monetary transmission in Jordan using the vector autoregressive approach. We find that the real 3-month CD rate, the Central Bank's operating target, affects bank retail rates and that monetary policy, measured by the spread between the 3-month CD rate and the U.S. Federal Funds rate, is effective in influencing foreign reserves. We do not find evidence of monetary policy affecting output. Output responds very little to changes in bank lending rates. Furthermore, equity prices and the exchange rate are not significant channels for transmitting monetary policy to economic activity. The effect of monetary policy on the stock market seems insignificant.

Keywords: Jordan, monetary policy, transmission mechanism

JEL Classification: O53, E4, E5

Suggested Citation

Poddar, Tushar and Sab, Randa and Khachatryan, Hasmik, The Monetary Transmission Mechanism in Jordan (February 2006). IMF Working Paper No. 06/48, Available at SSRN: https://ssrn.com/abstract=892939

Tushar Poddar (Contact Author)

International Monetary Fund (IMF) - Middle East and Central Asia Department ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Randa Sab

International Monetary Fund (IMF) - Middle East and Central Asia Department ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Hasmik Khachatryan

International Monetary Fund (IMF)

700 19th Street, N.W.
Washington, DC 20431
United States

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