Fiscal Deficit and Economic Growth: Structural Behavior of the Jordanian Economy

Abstract

The purpose of this study is to investigate Jordan’s
current fiscal conditions, development, and its effect on the
economy in the context of a fragile recovery from the global
financial crisis 2008 (GFC). It examines the relationship between
before and after grants fiscal deficit and economic growth and
analyzes the past trends of the major fiscal variables and policy
measures. The results suggest that before (after) grants fiscal
deficit yields a weakly positive (negative) correlation with GDP
growth, in short and long term alike. Therefore, this supports the
Neo-Ricardian viewpoint of neutral effect of fiscal deficit on
economic growth.