The Effect of Government Support for Fuel and Wheat on Economic Growth in Jordan: An Application of Dynamic Autoregressive-Distributed Lag

Abstract

This study aims to investigate the effect of government support for Fuel and Wheat on economic growth in Jordan. This study employs the time series data from 1970-2019. Furthermore, this study applies the powerful unit root to test the stationarity of the variables. The unit root tests are Augmented Dickey-Fuller, Phillips-Perron, Saikonen and Lütkepohl and Zivot-Andrews. Moreover, this study also uses a recent cointegration test developed by Gregory and Hansen to investigate the long-run effect of government support for fuel and Wheat on economic growth. Similarly, this study uses dynamic autoregressive distributive lags. The results of unit root tests show that all the variables are stationary. Also, the results of the cointegration test reveal the long-run effect of government support for fuel and Wheat and trade openness on economic growth in Jordan. Similarly, the long-run and short-run estimates reveal the positive effects of both government support for fuel and Wheat and trade openness on economic growth, respectively. While the 2015 food crisis shows a negative effect on economic growth, conclusively, the policy will be contributed to Jordan to optimize the effects of government support for fuel and Wheat in economic growth. It is also recommended that if government support is utilized in the excess amount, the excessive development support becomes unproductive at the margin. Moreover, fiscal policy can be used as a macroeconomic instrument for economic stability. Intensive government support should be employed as an investment by allocating the funds to productive sectors. In addition, the government needs to make sure that increment in government support does not hurt the economy, particularly the economy of people within the country.