Output Money and Prices The Case of Jordan

The relationship between gross domestic product growth, money supply, and prices was not important for the formulation of monetary policy in Jordan. Taking into account the importance of these three variables, we analyzed the short run relationship between money, the price, and the gross domestic product (GDP) growth for the Jordanian economy. Time series methods were used for the annual data for the period 1976-2009. The results indicate that there is not an existing short-term relationship between money supply (M1) and GDP growth in Jordan. However, the monetary policy has not had any impact on the Jordanian macroeconomic variables, while it found out that there is a causal relationship from money supply to inflation, with low degree of (0.21).

Keywords: monetary policy, gross domestic product (GDP), money supply, prices, vector autoregressive model