Nexus Between Public Debt, Financial Development, and The Volatility of Economic Growth in Emerging Markets

This paper examines the impact of government debt and financial development on the volatility of economic growth in an emerging market namely, Jordan.In this research, we examine the impact of both government debt and financial development on the volatility of (macro-level) economic growth in Jordan by implementing estimation methods for time series analysis involving VECM and GARCH models for sample data.Based on previous empirical research, we test the empirical prediction of GDP Volatility persistence.Using annual data for the period 1990 -2018 and also using quarterly data for real GDP per capita and gross public debt for the period 2000 -2018.The empirical analysis is based on employing a Vector Error Correction Model (VECM) to study the short-term dynamics of the long-run relationship within the cointegration framework.In addition, we utilize the GARCH and ARCH models to measure the volatility.However, the empirical results indicate that there are no clear significant effects for public debt and financial development on the volatility of economic growth, and hence there is no persistence of past volatility in elucidating the current volatility of the GDP.These empirical findings contribute to the continuing debate on the intricate dynamics between public debt, financial development, and macroeconomic stability, which is a matter of scholarly attention.It is revealed that the research considers different facets and the complexity of the Jordan economy.