Aktham Issa Maghyereh

Oil Price Shocks and Emerging Stock Markets: A Generalized VAR Approach

This study examines the dynamic linkages between crude oil price shocks and stock market returns in 22 emerging economies. The vector autoregression (VAR) analysis is carried on daily data for the period spanned from January 1, 1998 to April 31, 2004. This study utilized the generalized approach to forecast error variance decomposition and impulse response analysis in favor of the more traditional orthogonalized approach. Inconsistent with prior research on developed economies, the findings imply that oil shocks have no significant impact on stock index returns in emerging economies. The results also suggest that stock market returns in these economies do not rationally signal shocks in the crude oil market.

Causal Relations Among Stock Prices and Macroeconomic Variables in the Small, Open Economy of Jordan

The purpose of this study is to investigate the long run relationship between the Jordanian stock prices and selected macroeconomic variables by using Johansens methodology in cointegration analysis and monthly time series data over for the period from January 1987 to December 2000. This study finds that macroeconomic variables are reflected in stock prices in the Jordanian capital market.

Value‐at‐risk under extreme values: the relative performance in MENA emerging stock markets

Purpose – The paper aims to investigate the relative performance of the most popular value-at-risk (VaR) estimates with an emphasis on the extreme value theory (EVT) methodology for seven Middle East and North Africa (MENA) countries. Design/methodology/approach – The paper calculates tails distributions of return series by EVT. This allows computing VaR and comparing the results with Variance-Covariance method, Historical simulation, and ARCH-type process with normal distribution, Student-t distribution and skewed Student-t distribution. The paper assesses the performance of the models, which are used in VaR estimations, based on their empirical failure rates. Findings – The empirical results demonstrate that the return distributions of the MENA markets are characterized by fat tails which implies that VaR measures relies on the normal distribution will underestimate VaR. The results suggest that the extreme value approach, by modeling the tails of the return distributions, are more relevant to measure VaR in most of the MENA. Research limitations/implications – The results show that the use of conventional methodologies such as the normal distribution model to estimate the financial market risk in MENA countries may lead to faulty estimation of risk in the world of volatile markets. Originality/value – The paper tried to fill the gap in the literature and perform an evaluation of the relative performance of the most popular VaR estimates with an emphasis on the EVT methodology in seven MENA emerging stock markets. A comparison of the performance between EVT and other VaR techniques should support the decision whether more or less sophisticated methods are appropriate in order to assess stock market risks in the MENA countries.

External Debt and Economic Growth in Jordan: The Threshold Effect

The Jordanian economy has a serious external debt problem. Based on several indicators, it can be argued that foreign debt has reached an excessive level and has become an impediment to economic growth. This paper examines the impact of external debt on the performance of the Jordanian economy and determines the optimum level of debt, using new econometric techniques that provide appropriate procedures for estimation and inference. The findings of the study indicate that the optimal level of external indebtedness is about 53 percent of GDP. In other words, when the level exceeds this level, its impact on the performance of the Jordanian economy becomes negative.

Regional Integration of Stock Markets in MENA Countries

Using a trivariate vector autoregression model with a proper control for hetroscedasticity, this article empirically investigates the interdependence among the daily equity market returns for four major Middle Eastern and North African (MENA) emerging markets. The four equity markets studied are the Jordanian, Egyptian, Moroccan and Turkish markets. Evidence indicates that none of the MENA markets is completely isolated and independent. However, the results of the dynamic links indicate that the integration among these markets is still weak. The weakness of economic and financial ties between the MENA countries may explain this result.

Monetary policy and the central bank's securities

Open market operation (OMO) is one of the major instruments of conducting the monetary policy in both developing and developed countries. Using this instrument requires a well-developed secondary financial market. OMO can be implemented by using either government or central bank (CB) securities. Developing countries are using the second which raises a question about CB profits and the effect on the economy. This study, through evidence from a small developing country, Jordan, shows that issuing CB securities causes losses which affect the monetary policy continuity. Moreover, the paper extends a model introduced by Walsh (1998) to study the impact of the CB losses on some macroeconomic variables. The model shows that if the CB profits are part of the objective function then inflation, output and growth of the money supply tend to have a positive bias.

Examining complex unit roots in the MENA countries industrial production indices

An estimation of complex unit roots is presented based on the standardized periodogram of the Jordanian and Israeli Industrial Production indices over the period 1982–2003. Both indices are found to have six complex cyclical unit roots contents. In contrast, the propagation mechanism rather than impulse tends to drive the business cycles in those economies. Propagation consists of those forces which carry the influences of the shock forward over time and cause deviation from the steady state to be persistent. The periodogram-based cycle duration analysis reveals that both Kitchin and Juglar cycles exist in the Israeli economy. However, no investment cycles are found in the Jordanian economy.

The long-run relationship between stock returns and inflation in developing countries: further evidence from a nonparametric cointegration test

This study indirectly examines the issue of potential nonlinear long-run relationship between stock returns and inflation for 18 developing countries using recent developments in the theory of nonparametric cointegration. The empirical results found evidence of a nonlinear adjustment towards the long-run relationship between stock returns and inflation for 13 out of the 18 developing countries considered in this study. These findings are tentatively interpreted as adding to the recent evidence of nonlinearities in the relationship between stock returns and inflation.

Free trade agreements and equity market integration: the case of the US and Jordan

This study is aimed mainly to examine the impact of the US–Jordan Free Trade Agreement (UJFTA) on the degree of equity markets linkage. This issue is carried out through an asymmetric version of the Dynamic Conditional Correlation (DCC) model of Engle (2002) and developed by Sheppard (2002), which allows for asymmetries in both volatilities and conditional correlations. The empirical evidence suggests that the UJFTA has indeed increased substantially and significantly the linkages of the Jordanian capital market with the US equity markets. These results strongly support the argument that the direct trade flows is one of the most important determinant of cross-country linkages in equity markets.

Government Expenditures and Revenues in Jordan, What Cause What? Multivariate Cointegration Analysis

The hypotheses of tax-and-spend, spend-and-tax, and fiscal synchronization were tested using annual time series data for Jordan over the period 1969-2002. We include GDP as a control variable into the model. The results from Granger causality test and impulse response function and variance decomposition analysis based on the corresponding multivariate error-correction models suggest feedback effect between government revenues and government expenditures, supporting the fiscal synchronization hypothesis for Jordan.