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Original scientific paper

Deposit Rate and Lending Rate in Jordan, Which leads Which? A Cointegration Analysis

Osama D. Sweidan ; Department of Accounting, Finance and Economics, University of Sharjah, UAE

Full text: english pdf 159 Kb

page 37-48

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This study intends to investigate empirically the long-run relationship between deposit and
lending rates in Jordan by utilizing quarterly data over the period (1994-2010). Empirically,
we search to identify the dominant interest rate; either deposit rate or lending rate. To
achieve the current study goals, we employ the error correction model technique and the
asymmetric short-run dynamic model. The empirical evidence of the Jordanian economy
illustrates deposit and lending rates have a long-run relationship. Deposit rate leads lending
rate. As a result, the short-run lending rate adjustment for the deviation from the long-run
equilibrium by about 22 percent in the current period. In the long-run, lending rate adjusts
by 90 percent for a change in deposit rate.


Monetary policy, Retail interest rate, Symmetric adjustment, Interest rate pass-through, Error correction model

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