vol 25 no3,2025

The Economic Effects of the General Budget Deficit: A Case Study of Jordan

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The Economic Effects of the General Budget Deficit: A Case Study of Jordan.

Abstract:

This study aims to demonstrate the economic effects of the budget deficit on the interest rate and public debt in Jordan during the period (1980-2022). Time-series data for the period (1980-2022) were used. The study employed the Three-Stage Least Squares (3SLS) model, which is a method for estimating models containing a system of simultaneous equations. The results showed that there is no effect of the budget deficit on the interest rate. The estimation also indicates a lack of statistical significance between the model's independent variables and the interest rate. The results also showed an inverse relationship between the budget deficit and the total public debt in Jordan. The study recommended the necessity of improving the public budget deficit by advancing the economy's role and enhancing economic growth, which increases the gross domestic product (GDP). This can be achieved by generating more revenue, reducing reliance on borrowing, and increasing investments in stimulating and economically profitable projects that benefit society and contribute to economic growth.It also recommended supporting and encouraging vital industrial and service sectors to boost economic growth, by supporting small and medium-sized industries, tourism, and technology. Furthermore, it emphasized the need to invest in developing infrastructure such as roads, bridges, ports, and communications, with the aim of enhancing the country's ability to attract foreign investment and support the growth of various economic sectors, thereby reducing public debt.

Keywords: Economic impacts, budget deficit, interest rate, total public debt, economic growth, Jordan.

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