The Determinants of Financial Development in Jordan: VECM

This study aimed to investigate the determinants of financial development (FD) in Jordan through the period 1990-2018. Johansen cointegration test, VAR and VECM are used in this study. co integration test, and VECM results show that there is a long run relationship between trade openness (OPEN), GDP per capita (GDPPC), foreign direct investment (FDI), tax revenues (TAXR), inflation rate (INF) and financial development (FD) in Jordan. The VECM output show that (OPEN), (GDPPC), and (FDI) are a good determinant for (FD) in Jordan since they have a positive and significant impact. while (TAXR) and (INF) are not determinants for (FD) since they have a negative but not significant impact on (FD). The study suggested that government of Jordan should work to preserve trade openness, increasing GDP per capita and increasing attracting (FDI) due to its positive and significant effects on the (FD) in Jordan.