International Journal of Economic and Finance; Vol. 7, No. 2; 2015 ISSN 1916-971X E-ISSN 1916-9728 Publied by Canadian Center of Science and Education Analying Long-Run and Sort-Run Relationip between Macroeconomic Variable and Murabaa to te Purcae-Order: Evidence from Jordanian Ilamic Bank Nurila Amad 1, Moamad Yazi 1 & Moammad Salem Oudat 1 1 Faculty of Economic and Muamalat, Univeriti Sain Ilam Malayia (USIM), Malayia Correpondence: Moammad Salem Oudat, Faculty of Economic and Muamalat, Univeriti Sain Ilam Malayia (USIM), Bandar Baru Nilai, 71800 Nilai, Negeri Sembilan, Malayia. E-mail: moammad.oudat@yaoo.com Received: November 10, 2014 Accepted: November 28, 2014 Online Publied: January 25, 2015 doi:10.5539/ijef.v7n2p168 URL: ttp://dx.doi.org/10.5539/ijef.v7n2p168 Abtract Ti paper preent an empirical examination on te equilibrium relationip between macroeconomic variable (gro dometic product (GDP), foreign direct invetment (FDI), and money upply (M2)) and Murabaa to te Purcae-Order (MPO), by uing annual time erie data for te 1978 2012 period. Te Ng- Perron (2001) wa applied to tet te integration level, wile te bound F-tatitic tet wa ued to examine te co-integration relationip among te variable. Te autoregreive ditributed lag (ARDL) approac wa employed to examine long-run and ort-run relationip between te variable. Te reult indicate tat all variable are tationary at firt difference and all variable are co-integrated. Furter, te reult of te ARDL indicate tat tere i a poitive relationip between macroeconomic variable and MPO in long-run and ort-run. Keyword: murabaa to te purcae-order, Jordanian Ilamic bank, macroeconomic variable, ARDL approac, Jordan 1. Introduction An expanive body of literature a attempted to explore te relationip between tock market and te macroeconomic variable for bot developed and developing countrie (AL-Sarka, 2004; Beket & Mugable, 2012; Ratanapakorn & Sarma, 2007; Haing & Hie, 2012). Mot empirical evidence a demontrated tat tere i a trong and poitive nexu between economic growt and indicator of financial development (King & Levine, 1993a, 1993b; Levine, 1997; Rajan & Zingale, 1998). Furtermore, tere ave been numerou tudie tat attempted to invetigate te linkage between banking ytem and te macroeconomic variable (Deidda & Fattou, 2002), but tere are only a andful of reearce tat focu on te impact of macroeconomic variable on te Ilamic bank a a ingle entity. Terefore, to analye te effect of ome macroeconomic variable on te Ilamic bank, ti tudy trie to explore te relationip between Murabaa to te Purcae Order (MPO) a proxy of Jordan Ilamic Bank (JIB), wic i, repreent 53% of te JIB operation (Abdul-Kaliq, 2014) and macroeconomic variable repreented by Gro Dometic Product (GDP), Foreign Direct Invetment (FDI) and Money Supply (M2) for te period 1978 to 2012 by employing one of te contemporaneou time erie analyi tecnique wic i te Autoregreive Ditributed Lag (ARDL) approac developed by Pearan et al. (2001). Te main goal of ti tudy i to acertain if te macroeconomic variable ave effect on te Ilamic banking a in te tock market or not. Nonetele, te literature owed tat te tock market ave been affected by te macroeconomic variable, for intance, GDP a poitive relationip wit te tock market (Haing & Hie, 2012) imilar to FDI tat alo a poitive linkage wit te tock market (Ali, 2014), wile tere i a poitive relationip between M2 and tock market in te ort-run but negative in te long-run (Hump & Macmillan, 2005). Te ret of ti tudy i organized a follow: Te econd ection introduce te overview of te Jordanian economy and te Ilamic bank. Te tird ection preent te literature review in developed and developing countrie. Te fourt ection reveal te metodology, model and te data ued. Te fift ection dicue te empirical reult. Te final ection provide te concluion and recommendation. 168
www.ccenet.org/ijef International Journal of Economic and Finance Vol. 7, No. 2; 2015 2. Overview of te Jordanian Economy and Ilamic Bank Jordan i a mall open country wit limited natural reource. Te country economy i bogged down by deficiency of water, oil, ga, and oter natural reource. Furter, Jordan face oter iue uc a ig budget deficit, ig outtanding public debt, ig rate of poverty and unemployment (Central Bank of Jordan, 2013). Owing to tee callenge, Jordanian economy relie eavily on external aid, labor remittance tat are motly from te Gulf countrie and external debt, and wit regard to te natural reource, Jordan import oil from Iraq and ga from Egypt and recently from Qatar. During te 1970, te Jordanian economy recorded ig growt rate and uge capital inflow a a reult of te rie in te global oil price. Ti a increaed te demand on te Jordanian labor and indeed augmented te remittance to Jordan. However, in 1980, Jordanian economy witneed a receion period wic wa caued by a number of reaon uc a te decreae in oil price and te plummet of Jordanian dinar price from U.S. $ (2.95)for eac one Jordanian dinar in 1982 to U.S. $ (1.73) for te ame unit. Te period of 1990 it wa toug on Jordan' economy following te crii in Kuwait wic a caued te expulion of Jordanian worker from Kuwait, reduction of remittance and decreae in international aid. However, Jordan economic ituation tarted to recover after 1999 after following and implementing te new economic policie uc a te privatization of companie, igning many international agreement and global open trade. Nonetele, in 2008 Jordan economy wa badly affected by te global financial crii. More recently, in te end of 2010 Jordan ad to face wit difficult callenge caued by te political ituation in te neigboring countrie epecially in Syria and Iraq. Ti ad placed Jordan economy under preure a many refugee fled from toe countrie wile te countrie (Syria and Iraq) ad topped upplying oil and ga. In ort, ince 1976 until te preent time Jordan a been trying to reform te economy by implementing different police uc a privatizing, encouraging te local and foreign invetment and opening te trade regime. Since tat year (1976), numerou financial crie and political event ave appened and affected Jordan economy and financial ytem uc a te Iraq war in 1991, te bombing of Amman in 2005, te Global Financial Crii and more recently te 2011 Arab Spring tat prang up in te neigboring countrie (Iraq, Egypt and Syria). Te Ilamic banking in Jordan a exited for more tan two decade, tat i, ince te etabliment of te firt Ilamic bank in te country under name of Jordan Ilamic Bank in 1978. From ten on, te Bank a tarted to play an important role in te Jordanian financial market by contributing to different economie and ocial ector wit compliance wit te Saria principle and Ilamic rule (Sale & Zeitun, 2006). Currently, JIB offer many Ilamic intrument to benefit te cutomer and one of toe principle i Murabaa to te Purcae Order. MPO (Million JD) 1000 500 0 y = 1E+08e 0.029x R² = 0.1771 MPO 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Figure 1. Murabaa to te purcae-order in Jordan for te1978 2012 period Source: Jordan Ilamic Bank for Finance and Invetment, Annual Report, 1978 2012. Figure 1 ow tat MPO ad reaced a yearly growt rate of 2.9% for te 1978 2012 period and te increaing rate wa notable before te global financial crii (GFC) and during te period of Arab Spring. However, altoug te Ilamic bank were affected by te global financial crii and te political event, te effect differ from tat of te conventional bank and tock market tat may be related to it nature aet of te Ilamic bank (Kaleem, 2000). GDP i te um of te monetary value of all final good and ervice produced in te dometic economy and old in organized market during a pecified period of time, uually in a period of a year. Figure 2 reveal tat te GDP a acieved an annual growt rate of 8.6% for te 1978 2012 period. Ti wa due to te increaed number of invetor during te Iraq War in 2004 and te Arab Spring in 2011, wic led to te tranfer of invetment to Jordan a one of te mot table countrie in te Middle Eat. 169
www.ccenet.org/ijef International Journal of Economic and Finance Vol. 7, No. 2; 2015 GDP (Billion) 30.00 20.00 10.00 0.00 y = 9E+08e 0.0868x R² = 0.9816 GDP Figure 2. Gro dometic product in Jordan for te 1978 2012 period Source: Te World Bank, Jordanian Development Indicator Databae (2013) available online at: ttp://data.worldbank.org/country/jordan GDP 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Figure 3 repreent te FDI inflow to Jordan and te figure clearly ow tat tere i volatility in Jordanian FDI wic mean tat te Jordanian economy a been impacted by te global war and financial crie tat ad taken place in different pae of conflict uc a te financial crii in 1989, te Gulf War in 1991, te Aian financial crii (AFC) in 1997, te tragedy of September 11 in 1999, te Iraqi War in 2004, te GFC in 2008 and te Arab Spring in 2010. FDI (% of GDP) 30 20 10 0 y = 0.2988e 0.0946x R² = 0.356 FDI 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20012 Figure 3. Foreign direct invetment in Jordan for te 1978 2012 period Source: Te World Bank, Jordanian Development Indicator Databae (2013), available online at: ttp://data.worldbank.org/country/jordan FDI M2 include all pyical money, uc a coin and currency, a well a demand depoit, cecking account and Negotiable Order of Witdrawal (NOW) account plu aving depoit, money market mutual fund and oter time depoit, wic are le liquid and not a uitable a excange medium but can be quickly converted into ca or cecking depoit. M2 (Billion JD) 10 5 0 y = 5E+08e 0.0741x R² = 0.9514 M2 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Figure 4. Money upply rate in Jordan for te 1978 2012 period Source: Te World Bank, Jordanian Development Indicator Databae (2013), available online at: ttp://data.worldbank.org/country/jordan M2 Figure 4 ow tat M2 ad reaced a yearly growt rate of 7.4% for te 1978 2012 period. A own in Figure 4, M2 tarted wit a low value of JD 3.71 million in 1978 and reaced te iget peak in 2012 wit te value amounting to7.15 billion. Ti wa caued by te riing amount of external grant from te developed countrie and Gulf countrie to upport te Syrian refugee. Furtermore, ome of tee refugee ad witdrawn teir invetment from teir country and reinveted it in Jordan a tey ad een it a a politically table country in te Middle Eat. 170
www.ccenet.org/ijef International Journal of Economic and Finance Vol. 7, No. 2; 2015 3. Literature Review Te link between banking and economic et a been examined ince 1911 wen Scumpeter tried to find te importance of te banking ytem on te level and growt rate of national income. Nonetele, more dicuion are needed wit regard to te iue from different perpective. Financial intrument uc a credit provided by banking ector and te liabilitie of te ytem in te economy are correlated wit GDP, aving, and openne trade (Leitão, 2012). Similarly, Joepine (2009) and Plamen and Kami (2009) argued tat bank credit could elp in te proviion of fund to generate productive invetment. In general, many tudie ave been conducted in te pat on te relationip between bank credit and economic growt. For intance, a tudy by Ibraim (2006) owed tat tere wa a poitive relationip between GDP and bank activity becaue an increae in GDP will raie bot upply and demand for loan. A GDP increae, bank will ave more fund to make loan due to te increae in te amount of depoit. Moreover, Agrawal (2001) found tat bot ig rate of growt of income per capita and te rapidly declining age dependency ratio ave contributed to te ig rate of aving in te even Aian countrie namely, Sout Korea, Taiwan, Singapore, Malayia, Tailand, Indoneia and India (Haron & Wan Azmi, 2006). Furter, Deidda and Fattou (2002) concluded tat tere i a poitive correlation between bank-baed financial development and growt of te economy in countrie wit iger income, and a indicated by Laktutiene (2008), wen te income of te country grow, market-baed financial tructure will increae. Gavin and Haumann (1998) and te report from IMF (1993) igligt tat advere ock in trading activity ave a ignificant impact on te banking ytem of Argentina, Cile, Colombia and Uruguay. Albeit tat, tudie tat invetigate te relationip between Ilamic banking and macroeconomic variable are till very rare (Furqani & Mulyany, 2009; Manap et al., 2012). 4. Data and Metodology In ti paper te annual time erie data are ued, wic are from te 1978 2012 period. Te MPO i a preent of Jordan Ilamic Bank (dependent variable) and tree variable repreenting GDP, FDI and M2 (independent variable). Te data gatered are from te World Bank, Jordan Central Bank, te International Monetary Fund (IMF) and te Annual Statitical Bulletin of Jordan Ilamic Bank. All te time erie data are tranformed into logaritm. Te current tudy analye te equilibrium relationip among MPO and GDP, FDI and M2 in tree tep. In te firt tep, te integration level (tationary tet) of variable are detected and Ng and Perron (2001) i te mot popularly ued for ti purpoe. In te econd tep, te Co-integration tet i performed uing te Bound F-Statitic tet, and in te final tep, te ARDL approac i ued to etimate te equilibrium relationip among variable in model. Te paper a coen te ARDL approac becaue it generate conitent etimate of te long-run coefficient tat are aymptotically normal regardle of weter te underlying regreor are I(0), I(1) or factional integrated. In addition to tat, Pearan and Pearan (1997) alo dicovered tat te ARDL could be a reliable etimation and ypotei teting tool for te long-run coefficient for a mall ample in bot cae were te underlying regreor are I(1) or I(0). Te ARDL approac can be framed a in Equation. (1), (2), (3) and (4): v 11 v 12 ΔLMPO t = β 1 + δ 11 LMPO t-1 + δ 12 LGDP t-1 + δ 13 LFDI t-1 + δ 14 LM2 t-1 + ΔLMPO t- + ΔLGDP t- + v 13 v 14 ΔLFDI t- + ΔLM2 t- τ 1 ecm t-1 + ε 1t (1) v 21 v 22 ΔLGDP t = β 2 + δ 21 LGDP t-1 + δ 22 LMPO t-1 + δ 23 LFDI t-1 +δ 24 LM2 t-1 + ΔLGDP t- + ΔLMPO t- + v 23 v 24 ΔLFDI t- + ΔLM2 t- τ 2 ecm t-1 + ε 2t (2) v 31 v 32 ΔLFDI t = β 3 + δ 31 LFDI t-1 +δ 32 LMPO t-1 +δ 33 LGDP t-1 + δ 34 LM2 t-1 + ΔLFDI t- + ΔLMPO t- + v 34 v 33 ΔLGDP t- + ΔLM2 t- τ 3 ecm t-1 + ε 3t (3) 171
www.ccenet.org/ijef International Journal of Economic and Finance Vol. 7, No. 2; 2015 v 41 v 42 ΔLM2 t = β 4 +δ 41 LM2 t-1 +δ 42 LMPO t-1 +δ 43 LGDP t-1 +δ 44 LFDI t-1 + ΔLM2 t- + ΔLMPO t- + v 44 v 43 ΔLGDP t- + ΔLFDI t- τ 4 ecm t-1 + ε 4t (4) Here β i (i= 1 4) denote te intercept term. (i= 1 4) repreent te ort-run coefficient. τ i (i = 1 4) denote te coefficient of error correction term, i,e., (ecm t-1 ). ε it (i= 1 4) tand for te error term. Indicate te lag lengt elected uing t wic repreent te lag order. δ i (i= 1 4) denote te long-run coefficient. 5. Reult Analyi 5.1 Stationarity Tet Table 1 preent te reult of unit root tet wic Ng-Perron, wic indicate tat all erie are found to be non-tationary at level and tationary at teir firt difference. Ti mean all variable are integrated for te ame order, i.e. I(1). Baed on tee reult te bound F-tatitic would be applied to tet te co-integration in te next tep. Tee reult are in line wit te reult obtained by Mugable (2013) wo uggeted te ue of bound F-tatitic tet if te variable are tationary at I(1). Table 1. Stationary tet reult Integration Variable Ng- Perron tet tatitic Ng- Perron aymptotic critical value 1% 5% 10% ΔLMPO 5.63** 4.03 5.48 6.67 I(1) ΔLGDP 18.18*** ΔLFDI 5.56** ΔLM2 233.52*** Note. (1) ***, **, * denote tatitical ignificance at te 1%, 5%, and 10% level, repectively. (2) Δ= firt difference. (3) Te Ng- Perron wa conducted uing te E-view econometric oftware package verion 7.1. 5.2 Co-Integration Tet Table 2 indicate tat all variable are co-integrated wic mean tat te H 0 of no co-integration among variable in te LMPO t, LGDP t, LFDI t, and LM2 t model i rejected. On te oter and, te ordinary leat quare (OLS) bound F-tatitic value in te LGDP t and LFDI t model are 15.52 and 7.27 repectively, wic are iger tan [I(1) = 5.53] at te 1% ignificance level. Meanwile, wit regard to te LM2 t model te value wa 4.33, wic i iger tan [I(1) = 4.08] at te 5% ignificance level. For LMPO t te value wa 3.55, wic i iger tan [I(1) = 3.46] at te 10% ignificance level. Table 2. Co-integration tet reult Bound F-tatitic critical value wit Intercept 1% ignificance level 5% ignificance level 10% ignificance level I(0) I(1) I(0) I(1) I(0) I(1) 4.09 5.53 2.94 4.08 2.46 3.46 OLS Bound F-tatitic value: Model Calculated F-tatitic Deciion LMPO 3.55* Co-integrated LGDP 15.52*** Co-integrated LFDI 7.27*** Co-integrated LM2 4.33** Co-integrated Note. (1) Te bound F-tatitic critical value were obtained from Pearan and Pearan (2009, p. 544) tatitical table. (2) ***, **, * repreent ignificance at te 1%, 5% and 10% level, repectively. (3) Te output of OLS Bound F-tatitic value were extracted from te Micro-fit econometric oftware package verion 4.1. 172
www.ccenet.org/ijef International Journal of Economic and Finance Vol. 7, No. 2; 2015 5.3 Equilibrium Relationip Analyi Table 3 ow tat LGDP t, LFDI t and LM2 t are poitively aociated wit te LMPOt model in long-run and ort run at te 1% ignificance level. Tat i, if tere i 1% increae in LGDP t, LFDI t and LM2 t, te LMPO t model increae by 0, 3661%, and 0 in long-run, repectively. Wile, in ort-run are 0, 121% and 0, repectively, and vice vera. Table 3. Equilibrium relationip analyi for te LMPO t model 33 obervation ued for etimating te long-run relationip in te LMPO t Model Variable Coefficient Standard error T-ratio P-value Significance Level Intercept term 1.07 3.53 3.02 0.00 1% LGDPt-1 0.00 0.03 0.31 0.00 1% LFDIt-1 36.61 51.48 0.71 0.00 1% LM2t-1 0.00 0.02 0.23 0.00 1% 33 obervation for etimating te ort-run relationip and ecm t-1 in te ΔLMPO t Model Te election of ARDL (1, 0, 1, 0) approac i baed on Scwarz Bayeian Criteria (SBC). Variable Coefficient Standard error T-ratio P-value Significance Level Intercept term 5.69 2.64 2.15 0.04 5% ΔLGDP t 0.00 0.01 0.31 0.75 1% ΔLFDI t 1.21 30.62 3.95 0.00 1% ΔLM2 t 0.00 0.01 0.23 0.00 1% Ecm t-1-0.53 0.16-3.30 0.00 1% Diagnotic tet: χ 2 Autocorrelation (1) = [0.10]; χ 2 Heterocedaticity (1) = [0.85]; χ 2 Normality (2) = [0.80]; R 2 = 0.53; Ṝ 2 = 0.44; F-tatitic = 7.76; p-value= 0.00. Note. (1) Figure in parentee repreent te p-value of F-tatitic. (2) Figure in bracket denote te p-value of te ci-quare (χ 2 ). (3) AIC preent Akaike information criterion tat calculate te lag lengt and order. (4) Te output wa ourced from te Micro-fit econometric oftware package verion 4.1. Table 4. Equilibrium relationip analyi for te LGDP t model 33 obervation ued for etimating te long-run relationip in te LGDP t Model Variable Coefficient Standard error T-ratio P-value Significance Level Intercept term -1.39 5.81-0.23 0.81 Inignificant LMPO t-1 5.54 4.00 1.38 0.03 5% LFDI t-1 1.52 9.90 1.53 0.00 1% LM2 t-1 0.89 0.08 11.19 0.00 1% 33 obervation for etimating te ort-run relationip and ecm t-1 in te ΔLGDP t Model. Te election of ARDL (1, 2, 0, 0) approac i baed on SBC. Variable Coefficient Standard error T-ratio P-value Significance Level Intercept term -2.23 1.71-1.30 0.02 5% ΔLMPO t 1.12 0.91 1.23 0.22 5% ΔLMPO t-1-3.39 0.85-3.95 0.00 1% ΔLFDI t 2.18 1.53 1.42 0.00 1% ΔLM2 t 0.17 0.05 2.88 0.00 1% Ecm t-1-0.19 0.08-2.32 0.02 5% Diagnotic tet: χ 2 Autocorrelation (1) = [0.31]; χ 2 Heterocedaticity (1) = [0.34]; χ 2 Normality (2) = [0.40]; R 2 = 0.85; Ṝ 2 = 0.82; F-tatitic = 7.45; p-value= 0.00. Note. (1) Figure in parentee repreent te p-value of F-tatitic. (2) Figure in bracket denote te p-value of te ci-quare (χ 2 ). (3) AIC preent Akaike information criterion tat calculate te lag lengt and order. (4) Te output wa ourced from te Micro-fit econometric oftware package verion 4.1. Table 4 preent tat LFDIt and LM2t are poitively aociated wit te LGDPt model at te 1% ignificance level in long-run and ort-run. Tat i, if tere i 1% increae in LFDIt, te LGDPt model increae by 152% in long-run and 218% in ort-run. In addition, if tere i 1% increae in LM2t, te LGDPt model increae by 89% in long-run and 17% in ort run, and vice vera. Moreover, tere i poitive relationip between LMPOt and 173
www.ccenet.org/ijef International Journal of Economic and Finance Vol. 7, No. 2; 2015 LGDPt model at te 5% ignificance level in long-run and negative relationip in ort-run at te 1% ignificance level. Tat i, if tere i 1% increae in LMPOt, te LGDPt model increae by 554% in long-run. Wile, if tere i decreae 1% in LMPOt in ort-run, te LGDPt model increae by 339%, and vice vera. Table 5 depict tat LMPO t i poitively aociated wit LFDI t model at te 5% ignificance level in te long-run and ort-run. Tat i, if tere i 1% increae in LMPO t, te LFDI t model increae by 72% in long-run and 25% in ort-run, and vice vera. Tu, te increae of LMPOt raie te LFDIt model in long and ort run. Table 5. Equilibrium relationip analyi for te LFDI t model 33 obervation ued for etimating te long-run relationip in te LFDI t Model Variable Coefficient Standard error T-ratio P-value Significance Level Intercept term -9.22 5.28-1.74 0.09 10% LMPOt-1 0.72 0.33 2.18 0.03 5% LGDPt-1 0.12 0.30 0.39 0.00 1% LM2t-1-0.81 0.22-0.35 0.72 Inignificant 33 obervation for etimating te ort-run relationip and ecm t-1 in te ΔLFDI t model. Te election of ARDL (1, 0, 0, 0) approac i baed on SBC. Variable Coefficient Standard error T-ratio P-value Significance Level Intercept term -2.13 1.27-1.67 0.10 Inignificant ΔLMPOt 0.25 0.69 3.72 0.01 5% ΔLGDPt -0.58 0.84-0.69 0.00 1% ΔLM2t 0.20 0.64 0.31 0.75 Inignificant Ecmt-1-0.33 0.12-2.63 0.01 1% Diagnotic tet: χ 2 Autocorrelation (1)= [0.54]; χ 2 Heterocedaticity (1)= [0.60]; χ 2 Normality (2) = [0.23]; R 2 = 0.40; Ṝ 2 = 0.32; F-tatitic = 4.81; p-value= 0.04. Note. (1) Figure in parentee repreent te p-value of F-tatitic. (2) Figure in bracket denote te p-value of te ci-quare (χ2). (3) AIC preent Akaike information criterion tat calculate te lag lengt and order. (4) Te output wa ourced from te Micro-fit econometric oftware package verion 4.1. Table 6. Equilibrium relationip analyi for te LM2 t model 33 obervation ued for etimating te long-run relationip in te LM2 t Model. Variable Coefficient Standard error T-ratio P-value Significance Level Intercept term -3.99 4.46-0.089 0.92 Inignificant LMPOt-1-2.15 2.46-0.87 0.39 Inignificant LGDPt-1 1.01 0.10 9.80 0.00 1% LFDIt-1 8.06 5.15 1.56 0.04 5% 33 obervation for etimating te ort-run relationip and ecm t-1 in te ΔLFDI t model. Te election of ARDL (1, 0, 0, 0) approac i baed on SBC. Variable Coefficient Standard error T-ratio P-value Significance Level Intercept term -1.88 2.14-0.08 0.93 Inignificant ΔLM2 t-1 0.71 0.13 5.38 0.00 1% ΔLMPO t -1.01 1.08-0.94 0.35 Inignificant ΔLGDP t 0.59 0.18 3.32 0.00 1% ΔLGDP t-1 0.83 0.19 4.29 0.00 1% ΔLFDI t 3.81 1.94 1.95 0.06 5% Ecm t-1-0.47 0.12-3.66 0.00 1% Diagnotic tet: χ2 Autocorrelation (1) = [0.47]; χ2 Heterocedaticity (1) = [0.36]; χ2 Normality (2) = [0.23; R 2 = 0.43; Ṝ 2 = 0.86; F-tatitic = 34.25; p-value= 0.00. Note. (1) Figure in parentee repreent te p-value of F-tatitic. (2) Figure in bracket denote te p-value of te ci-quare (χ2). (3) AIC preent Akaike information criterion tat calculate te lag lengt and order. (4) Te output wa ourced from te Micro-fit econometric oftware package verion 4.1. Table 5 alo ow tat LGDP t i poitive related to te LFDI t model in long run at te 1% ignificance level. Wile, i negatively related in ort-run at te 1% ignificance level. Tat i, if tere i 1% increae in LGDP t, 174
www.ccenet.org/ijef International Journal of Economic and Finance Vol. 7, No. 2; 2015 te LFDI t model increae by 12% in long run. Wile, if tere i decreae 1% in LGDP t in ort-run, te LFDI t model increae by 58%, and vice vera. Furtermore, tere i negative aociated in long between LM2 t and LFDI t model at inignificance level but tere i poitive aociated in ort-run at inignificance level. Table 6 review tat LMPO t i negatively aociated wit LM2 t model at inignificance level in te long-run and ort-run. Tat i, if tere i 1% decreae in LMPO t, te LM2 t model increae by 215% in long-run and 101% in ort run, and vice vera. It i alo ow tat LGDP t i poitively aociated to te LM2 t model at 1% ignificance level in long-run and ort-run. Tat i, if tere i 1% increae in LGDP t, te LM2 t model increae by 101% in long-run and 83% in ort-run, and vice vera. Furtermore, it i ow tat LFDI t i poitively related to te LM2 t model at te 5% ignificance level in te long-run and ort-run. Tat i, if tere i 1% increae in LFDI t, te LM2 t model increae by 806% in long-run and 381% in ort-run, and vice vera. 6. Concluion and Furter Study Te current tudy examine te long-run and te ort-run relationip between te macroeconomic variable namely GDP, FDI and M2 and MPO. Te ARDL approac wa ued to tet te co-integration and etimate te equilibrium relationip for te annual time erie data from te 1978-2012 period. Te reult indicate tat all variable are tationary at firt difference and tere are co-integration among te variable. Furter, te reult ow tat tere i a poitive relationip between macroeconomic variable and MPO in te long-run and te ort-run. Tee reult confirmed tat Jordan Ilamic bank i affected by macroeconomic variable. Te paper add to te exiting literature in te field of te impact of macroeconomic variable and Ilamic bank by invetigating te long-run and te ort-run equilibrium relationip. Alo, furter tudy could be employed to analye empirically te relationip macroeconomic variable and conventional bank in Jordan. Reference Abdul-Kaliq, S. (2014). Comparion tudy of Murabaa and Itinaa in Ilamic banking in Jordan. Interdiciplinary Journal of Contemporary Reearc in Buine, 5(9), 603 612. Retrieved from ttp://journal-arcieve36.web.com/603-612jan14.pdf Agrawal, P. (2001). Te relation between aving and growt co-integration and cauality: Evidence from Aia. Applied Economic, 33, 499 513. ttp://dx.doi.org/10.1080/00036840122210 Ali, I. (2014). Impact of Foreign Direct Invetment on Volatility of Stock Market: An Evidence from Pakitani Market. IOSR Journal of Buine and Management (IOSR-JBM), 16(1), 77 80. ttp://dx.doi.org/10.9790/487x-16177780 Al-Sarka, A. (2004). Dynamic Relationip between Macroeconomic Factor and te Jordanian Stock Market. International Journal of Applied Econometric and Quantitative Studie, 1(1), 97 114. Retrieved from ttp://econpaper.repec.org/article/eaaijaeq/v_3a1_3ay2004_3ai_3a1_5f5.tm Beck, T., & Levine, R. (2004). Stock market, bank, and growt: Panel evidence. Journal of Banking and Finance, 28, 423 442. ttp://dx.doi.org/10.3386/w9082 Beck, T., Demirguc-Kunt, A., & Levine, R. (2000). A new databae on financial development and tructure. World Bank Economic Review, 14, 597 605. ttp://dx.doi.org/10.1093/wber/14.3.597 Beck, T., Demirguc-Kunt, A., Laeven, L., & Levine, R. (2005). Finance, firm ize and growt. World Bank Policy Reearc Working Paper No. 3485. ttp://dx.doi.org/10.1596/1813-9450-3485 Beket, H. A., & Mugable, M. I. (2012). Invetigating equilibrium relationip between macroeconomic variable and Malayian tock market index troug bound tet approac. International Journal of Economic and Finance, 4(10), 69 81. ttp://dx.doi.org/10.5539/ijef.v4n10p69 Central Bank of Jordan. (2013). Annual report for Amman, Jordan. Retrieved from ttp://www.cbj.gov.jo/page.pp?menu_id=12&local_type=0&local_id=0&local_detail=0& Deidda, L., & Fattou, B. (2002). Non linearity between finance and growt. Economic Letter, 74, 339 345. ttp://dx.doi.org/10.1111/j.1468-0351.2009.00360.x Engle, R., & Granger, C. (1987). Cointegration and Error Correction Repreentation, Etimation, and Teting. Econometrica, 55(2), 251 276. ttp://dx.doi.org/10.2307/1913236 Furqani, H., & Mulyany, R. (2009). Ilamic banking and economic growt: Empirical evidence from Malayia. Journal of Economic Cooperation and Development, 30(2), 59 74. Retrieved from ttp://www.ertcic.org/file/article/308.pdf 175
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