The Impact of Workers’ Remittances on the performance of Jordanian Financial Market

Abstract

The financial sector plays an important in the economic growth rates and the developmental process enhancement by savings mobilization and financing productive activity, allocating resources, raising investments, increasing its size by mobilizing capital pools, improving and monitoring them. Transferring them from the saved sectors to the sectors that need liquidity to finance its investments which, in turn, serves the developmental services. Jordanian expatriate workers' remittancesare considered one of the most important savings in Jordan.  Owing to the lack of explanation for the impact of Jordanian expatriate workers' remittances on the performance of Jordanian capitals that is represented in the indicators in Amman stock exchange and actual volume deposits for licensed banks in Jordan. This study aimed at knowing the relation and direction of relationship among Jordanian workers remittances abroad that are represented in real volume of trading, equity prices, turnover ratios in Amman stock marker, and actual volume deposits for the licensed banks in Jordan for the period of 1990-2014.

Sources: statistical bulletins for Amman stock market were adopted in order to obtain annual data for the following variables: real volume of trading, turnover ratios, and general indicator ofstock price.  However, Jordanian Central Bank database were employed for obtaining annual data for each of: broad money, interest price, Jordanian expatriate workers' remittances, actual volume deposits for licensed banks. On the other hand, direct foreign investment data were obtained from International Monetary Fund (IMF). The methods and procedures of the study lies in testing the stability extent for the used variables in time series by using ARDL approach.

Results: The study found a positive correlation between the real Jordanian remittances and the real volume of trading, the general indicator of stock price, turnover ratios, and actual volume deposits for licensed banks. The increased remittances with the ratio of 1% might lead to increase the realvolume of trading with the ratio of 2.3032%, increasethe general indicator ofstock price with the ratio of 2.3305%, increase turnover ratios with the ratio of 6.3197%, and raise actual volume deposits with the ratio of 0.0837%.

Recommendations: the study recommended to reconsider the policies and procedures that might impact on remittances. In addition to the necessity to develop the financial sector, and address the constraints and obstacles that might limit the investors demand for investment in financial market, and activating the governments' role in building bridges of trust between the country and Jordanian expatriate workers' remittances.