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THE ENVISAGED ROLE OF CAPITAL MARKETS: CAN THE JORDANIAN STOCK EXCHANGE MEET THE EXPECTATION OF ECONOMIC GROWTH

Year 2016, Volume: 2 Issue: 1, 475 - 484, 01.06.2016
https://doi.org/10.17261/Pressacademia.2016118669

Abstract

The subject matter of financial development in Jordan cannot be underestimated. For example, licensed banks’ total assets are equivalent to about 180 percent of Gross Domestic Product (GDP). In addition, the country boasts one of the oldest stock markets in the region. The Amman Securities Exchange (ASE) was established in 1978 and its current capitalization is equivalent to about 75 percent of GDP. Given Jordan’s socio-economic challenges, and the fact that successive governments have been suffering from relatively large and consistent budget deficits, it is surprising to learn that since the establishment of the ASE, the market has not developed an active secondary bonds market. The issued bonds are sold to all licensed banks. This observation is unfortunate. Avoiding the concentration of financial intermediation in banks makes sense. In addition, whilst a well-developed bond market allows banks to transfer their risk (securitization), such a market makes the conduct of monetary policy more effective and contributes to budgetary discipline by exposing the government to financial discipline. This paper argues for the need for developing a government securities market. In addition, the paper examines the already listed shares in terms of their liquidity cost. Based on the empirical results, it is reported that listed shares suffer from relatively high liquidity cost. This finding, and its implications, are useful in recommending what must be done to develop an active bonds market

References

  • Almarzoqi, R., S. Ben Naceur and A. Kotak (2015), “What Matters for Financial Development and Stability?”, IMF Working Paper No. /173.
  • Ang, J. (2008), “A Survey of Recent Developments in the Literature of Finance and Growth”, Journal of Economic Surveys 22: 536-576.
  • Barajas, A., R. Chami, and S. Yousef (2013), “The Finance and Growth Nexus Re-Examined: Do All Countries Benefit Equally?”, IMF Working Paper Np. 13/130.
  • Ben Naceur, S. and R. Zhang (2016), “Financial Development, Inequality and Poverty: Some International Evidence”, IMF Working Paper No. 32.
  • Brunetti A., (1997), “Political Variables in Cross-Country Growth Analysis”, Journal of Economic Surveys 11: 163-190.
  • Cherif, M. and C. Dreger (2014), “Institutional Determinants of Financial Development in MENA Countries”, German Institute for Economic
  • Research, Discussion paper No. 1422.
  • Ding, M., B. Nilsson and S. Suardi (2013), “Foreign Institutional Investors and Stock Market Liquidity in China: State Ownership, Trading
  • Activity and Information Asymmetry”, Working Paper No. 14, The Knut Wicksell Centre for Financial Studies, Lund University. Gagnon, M. and C. Gimet (2013), “The Impacts of Standard Monetary and Budgetary Policies on Liquidity and Financial Markets:
  • International Evidence from the Credit Freeze Crisis”, Journal of Banking and Finance 37: 4599-4614.
  • Goyenko, R., A. Subrahmanyam and A. Ukhov (2011), “The Terms Structure of Bond Market Liquidity and Its Implications for Expected
  • Returns”, Journal of Financial and Quantitative Analysis 46: 111-139. Greenwood, J. and Jovanovic, B. (1990), “Financial Development, Growth, and the Distribution of Income”, Journal of Political Economy 98: 1107.
  • Hamadi, H. and C. Bassil (2015), “Financial Development and Economic Growth in the MENA Region” Comparative Economic Studies 57: 622.
  • Jain, P. (2003), “Institutional Design and Liquidity of Stock Exchanges Around the World”, Working Paper, Indiana University.
  • Jiang, C., J. Kim and R. Wood (2011), “A Comparison of Volatility and Bid-Ask Spread for NASDAQ and NYSE after Decimalization”, Applied Economics 43: 1227-1239.
  • Kaldor N. (1970), “The Case for Regional Policies”, Scottish Journal of Political Economy 17: 337-348.
  • Krugman P. (1991), “Increasing Returns and Economic Geography”, Journal of Political Economy 99: 183-99.
  • Levine, R. (1991). Stock Markets, Growth, and Tax Policy”, Journal of Finance, 46: 1445-1465.
  • Lucas R. (1988), “On the Mechanics of Economic Development.” Journal of Monetary Economics 22: 3- 42.
  • Myrdal G. (1957), Economic Theory and Underdeveloped Regions, Hutchinson Publications.
  • North D. (1990), “Institutions, Institutional Change and Economic Performance”, Cambridge: Cambridge University Press.
  • Romer P. (1986), “Increasing Returns and Long Run Growth.”, Journal of Political Economy 94: 1002-1037.
  • Solow, R. (1956), “A Contribution to the Theory of Economic Growth”, The Quarterly Journal of Economics 70: 65-94.
  • USAID (2010), “Developing Government Bond Markets”, FS Series No, 12.
Year 2016, Volume: 2 Issue: 1, 475 - 484, 01.06.2016
https://doi.org/10.17261/Pressacademia.2016118669

Abstract

References

  • Almarzoqi, R., S. Ben Naceur and A. Kotak (2015), “What Matters for Financial Development and Stability?”, IMF Working Paper No. /173.
  • Ang, J. (2008), “A Survey of Recent Developments in the Literature of Finance and Growth”, Journal of Economic Surveys 22: 536-576.
  • Barajas, A., R. Chami, and S. Yousef (2013), “The Finance and Growth Nexus Re-Examined: Do All Countries Benefit Equally?”, IMF Working Paper Np. 13/130.
  • Ben Naceur, S. and R. Zhang (2016), “Financial Development, Inequality and Poverty: Some International Evidence”, IMF Working Paper No. 32.
  • Brunetti A., (1997), “Political Variables in Cross-Country Growth Analysis”, Journal of Economic Surveys 11: 163-190.
  • Cherif, M. and C. Dreger (2014), “Institutional Determinants of Financial Development in MENA Countries”, German Institute for Economic
  • Research, Discussion paper No. 1422.
  • Ding, M., B. Nilsson and S. Suardi (2013), “Foreign Institutional Investors and Stock Market Liquidity in China: State Ownership, Trading
  • Activity and Information Asymmetry”, Working Paper No. 14, The Knut Wicksell Centre for Financial Studies, Lund University. Gagnon, M. and C. Gimet (2013), “The Impacts of Standard Monetary and Budgetary Policies on Liquidity and Financial Markets:
  • International Evidence from the Credit Freeze Crisis”, Journal of Banking and Finance 37: 4599-4614.
  • Goyenko, R., A. Subrahmanyam and A. Ukhov (2011), “The Terms Structure of Bond Market Liquidity and Its Implications for Expected
  • Returns”, Journal of Financial and Quantitative Analysis 46: 111-139. Greenwood, J. and Jovanovic, B. (1990), “Financial Development, Growth, and the Distribution of Income”, Journal of Political Economy 98: 1107.
  • Hamadi, H. and C. Bassil (2015), “Financial Development and Economic Growth in the MENA Region” Comparative Economic Studies 57: 622.
  • Jain, P. (2003), “Institutional Design and Liquidity of Stock Exchanges Around the World”, Working Paper, Indiana University.
  • Jiang, C., J. Kim and R. Wood (2011), “A Comparison of Volatility and Bid-Ask Spread for NASDAQ and NYSE after Decimalization”, Applied Economics 43: 1227-1239.
  • Kaldor N. (1970), “The Case for Regional Policies”, Scottish Journal of Political Economy 17: 337-348.
  • Krugman P. (1991), “Increasing Returns and Economic Geography”, Journal of Political Economy 99: 183-99.
  • Levine, R. (1991). Stock Markets, Growth, and Tax Policy”, Journal of Finance, 46: 1445-1465.
  • Lucas R. (1988), “On the Mechanics of Economic Development.” Journal of Monetary Economics 22: 3- 42.
  • Myrdal G. (1957), Economic Theory and Underdeveloped Regions, Hutchinson Publications.
  • North D. (1990), “Institutions, Institutional Change and Economic Performance”, Cambridge: Cambridge University Press.
  • Romer P. (1986), “Increasing Returns and Long Run Growth.”, Journal of Political Economy 94: 1002-1037.
  • Solow, R. (1956), “A Contribution to the Theory of Economic Growth”, The Quarterly Journal of Economics 70: 65-94.
  • USAID (2010), “Developing Government Bond Markets”, FS Series No, 12.
There are 24 citations in total.

Details

Other ID JA87FU29FA
Journal Section Articles
Authors

Ghassan Omet This is me

Publication Date June 1, 2016
Published in Issue Year 2016 Volume: 2 Issue: 1

Cite

APA Omet, G. (2016). THE ENVISAGED ROLE OF CAPITAL MARKETS: CAN THE JORDANIAN STOCK EXCHANGE MEET THE EXPECTATION OF ECONOMIC GROWTH. PressAcademia Procedia, 2(1), 475-484. https://doi.org/10.17261/Pressacademia.2016118669
AMA Omet G. THE ENVISAGED ROLE OF CAPITAL MARKETS: CAN THE JORDANIAN STOCK EXCHANGE MEET THE EXPECTATION OF ECONOMIC GROWTH. PAP. June 2016;2(1):475-484. doi:10.17261/Pressacademia.2016118669
Chicago Omet, Ghassan. “THE ENVISAGED ROLE OF CAPITAL MARKETS: CAN THE JORDANIAN STOCK EXCHANGE MEET THE EXPECTATION OF ECONOMIC GROWTH”. PressAcademia Procedia 2, no. 1 (June 2016): 475-84. https://doi.org/10.17261/Pressacademia.2016118669.
EndNote Omet G (June 1, 2016) THE ENVISAGED ROLE OF CAPITAL MARKETS: CAN THE JORDANIAN STOCK EXCHANGE MEET THE EXPECTATION OF ECONOMIC GROWTH. PressAcademia Procedia 2 1 475–484.
IEEE G. Omet, “THE ENVISAGED ROLE OF CAPITAL MARKETS: CAN THE JORDANIAN STOCK EXCHANGE MEET THE EXPECTATION OF ECONOMIC GROWTH”, PAP, vol. 2, no. 1, pp. 475–484, 2016, doi: 10.17261/Pressacademia.2016118669.
ISNAD Omet, Ghassan. “THE ENVISAGED ROLE OF CAPITAL MARKETS: CAN THE JORDANIAN STOCK EXCHANGE MEET THE EXPECTATION OF ECONOMIC GROWTH”. PressAcademia Procedia 2/1 (June 2016), 475-484. https://doi.org/10.17261/Pressacademia.2016118669.
JAMA Omet G. THE ENVISAGED ROLE OF CAPITAL MARKETS: CAN THE JORDANIAN STOCK EXCHANGE MEET THE EXPECTATION OF ECONOMIC GROWTH. PAP. 2016;2:475–484.
MLA Omet, Ghassan. “THE ENVISAGED ROLE OF CAPITAL MARKETS: CAN THE JORDANIAN STOCK EXCHANGE MEET THE EXPECTATION OF ECONOMIC GROWTH”. PressAcademia Procedia, vol. 2, no. 1, 2016, pp. 475-84, doi:10.17261/Pressacademia.2016118669.
Vancouver Omet G. THE ENVISAGED ROLE OF CAPITAL MARKETS: CAN THE JORDANIAN STOCK EXCHANGE MEET THE EXPECTATION OF ECONOMIC GROWTH. PAP. 2016;2(1):475-84.

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