Title: Does trade openness affect banking sector development in Jordan?

Authors: Alaaeddin Al-Tarawneh; Ghazi Al-Assaf

Addresses: Department of Business Economics, School of Business, The University of Jordan, Amman, Jordan ' Department of Business Economics, School of Business, The University of Jordan, Amman, Jordan

Abstract: The main concern of this paper is to explore the potential effect of trade openness on different financial development indicators, especially in the banking sector. Using Jordanian data, the study has found evidence of significant positive effects of trade openness on the growth of various financial development indicators, especially credit to private, total liabilities ratio, total deposits ratio and financial depth over the period 1964 to 2014. The empirical results indicate that there is a long-run relationship between trade openness indicator and each financial development indicator except total deposits ratio. These results are obtained using a cointegration analysis, the E-G procedure within the ECM framework. The E-G results show trade liberalisation has a significant effect on the growth of credit to private sector indicator, financial assets ratio and financial depth.

Keywords: trade openness; banking development; Engel Granger procedure; ECM; Granger causality test; Jordan.

DOI: 10.1504/IJEBR.2018.094382

International Journal of Economics and Business Research, 2018 Vol.16 No.3, pp.281 - 296

Received: 04 Sep 2017
Accepted: 26 Sep 2017
Published online: 31 Aug 2018 *

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