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

Tigran Poghosyan

No 2010/256, IMF Working Papers from International Monetary Fund

Abstract: 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.

Keywords: WP; credit supply; rate; Jordan; financial crisis; credit crunch; credit demand; plotted credit supply and demand series; credit supply and demand function; disequilibrium credit market model; demand equation; supply equation; Credit; Bank credit; Global financial crisis of 2008-2009; Central bank policy rate; Stock markets; Global (search for similar items in EconPapers)
Pages: 15
Date: 2010-11-01
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Citations: View citations in EconPapers (6)

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Journal Article: Slowdown of credit flows in Jordan in the wake of the global financial crisis: Supply or demand driven? (2011)
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