Classical business cycles, resulting Burns and Mitchell (1946) can be defined as the sequential pattern of expansions and contractions in aggregate economic activity.
While business cycle fluctuations in developed markets may have moderated in recent decades (see Stock and Watson 2003), where the business cycle is commonly recognized as the periodic fluctuation of aggregate economic activity. The distinguishing volatility of emerging markets has been attested, for example, by Aguiar and Gopinath (2004) and the policy methods to managing volatility have been discussed by Aizenman and Pinto (2004).
The key issue in assessing emerging market volatility is whether it results from uncontrollable factors or is the importance of the policy outline within which countries operate.
Kaminsky, et.al (2004) document that rather than temporary as a soothing force, as in most previous economies, emerging governments' policies are “procyclical,” specifically, they reinforce economic booms and worsen recessions.
The second defining characteristic of emerging markets: their transitional structures. Emerging markets are in changeover in several senses.
Emerging markets possess numerous advantages that have fostered their growth. The attendance of low-cost labor, low cost capital, government support, knowledge workers, in addition to powerful, very networked conglomerates have helped make these countries formidable challengers in the global marketplace.
Emerging markets have become important for marketing a wide variety of products and services. The growing middle class in these countries suggests considerable demand for a variety of consumer products such as electronics and automobiles and services such as health care.
Also Jordan is not listed as one of these emerging countries . Thus the focus of this study will be directed to see the substantial variation in emerging markets in Jordan to integrate the results with results attested previously. ( Backus et.al, 1995).
Significance of the study:
This study will enrich the literature which concerns the emerging markets and their effects on the business cycle specially that a scarcity of these studies are present in Jordan.
Statement of the problem:
Jordan is one of the countries that attract investors from all around the world. Having reviewed the related literature, the researcher found that Studies on the emerging markets business cycle still rare in the Jordanian context.
Purposes of the study:
This study comes to highlight the current state of emerging markets and business cycle in Jordan
Hypotheses of the study:
Ha1: There is a positive statistically significant impact of export on the business cycle in Jordan.
Ha2: There is a negative statistically significant impact of counsamption on the business cycle in Jordan.
Sup-hypotheses of the study:
Ha1.1: There is a positive statistically significant impact of export on the income in Jordan.
Ha1.2: There is a positive statistically significant impact of export on the growth in Jordan.
Ha2.1: There is a negative statistically significant impact of counsamption on the income in Jordan.
Ha2.2: There is a negative statistically significant impact of counsamption on the growth in Jordan.
Limitations of the study:
Time limitations: this paper will submit the data collected from several features of economic fluctuations in emerging and developed small open economies in jordan for the years (2010- 2016)..
Place limitations: the assigned places for collecting the data are the several features of economic fluctuations in Jordan.
According to Bergman and Hutchison (2015), Fiscal Rules and Business Cycles in Emerging and Developing Economies, they employ a dynamic panel framework with 101 countries over 1985-2013. They find that fiscal rules are effective in reducing pro-cyclicality if implemented in countries with relatively high quality government bureaucracies. The converse also holds–higher government efficiency reduces pro-cyclicality but the effect is much stronger when combined with fiscal rules. They also find that balanced budget rules appear the most effective in reducing fiscal pro-cyclicality for a broad group of countries, but only expenditure rules appear effective in the developing-country group.
According to Duncan (2015), Simple Models to Understand and Teach Business Cycle Macroeconomics for Emerging Market and Developing Economies, The simplified models are employed for qualitatively explaining facts such as the countercyclicality of the trade balance and the real interest rate, and the higher volatility of output, consumption, and real wages compared with those observed in advanced countries.
According to Male (2010), Developing Country Business Cycles: Characterising the Cycle, this article examines the business cycle characteristics and synchronicity for the thirty-two developing countries. This research reveals that business cycles of developing countries are not significantly shorter than those of the developed countries, where the amplitude of both expansion and contraction phases tends to be greater in developing countries. However, themore specific timing of the onest of these fluctuations appears to be determined by country-specific factors.
According to Plessis (2006), Business Cycles in Emerging Market Economices: A New View of the Stylised Facts, The goal is to revisit the work of for example Agénor, McDermott and Prasad (2000), whom have established a set of stylised facts for business cycle fluctuations in developing countries.The alternative method, implemented in this paper, uses an algorithm of Bry and Boschan (1971), and the recent work of Harding and Pagan to identify the various stylised facts regarding the duration, steepness, amplitude and concordance of these fluctuations in emerging market economies.
According to Kose et al. (2003), How Does Globalization Affect the Synchronization of Business Cycles?, calculated the annual growth rates of per capita GDP to identify deviation cycles. The most important results of their study are: (i) while output volatility declined for all groups of countries with increasing globalisation, the same is not true of the volatility of consumption expenditure In developing countries Kose et al. (2003) observed an increase of consumption volatility with rising globalisation. (ii). The deeper trade and financial linkages that constitute rising globalisation led to greater co-movement for the growth cycle of industrialized countries, though Kose et al. (2003) observed a decline in the co-movement of developing country growth cycles with world aggregates.
According to Harding and Pagan (2002, 2006), Measurement of Business Cycles, have provided a new toolkit for the analysis of business cycles, and this has renewed interest in analysing developing country cycles. The key characteristics that these recent papers have identified are outlined below. However, as this is a relatively new econometric toolkit, and due to problems with acquiring quarterly time-series data for many developing countries, the available literature remains sparse.
According to Calderon and Fuentes (2010), Characterizing the Business Cycles of Emerging Economies identify the turning points in real GDP for fourteen emerging markets 6 (of which seven are Latin American countries and seven are Asian countries). In characterising the cycles, they make the key findings; firstly, that the duration of contraction phases, but not expansion phases, across country groups are very similar, secondly that the Latin American countries experienced more contractions than the Asian countries, and finally that whilst output losses during contractions are larger in emerging market economies than in developed countries, output gains during expansions are greatest in the emerging market economies. They use concordance indices to examine the co-movement of the business cycles, finding high concordance amongst the Asian countries, but little evidence of concordance amongst the Latin American countries. Furthermore, they find that the Asian economies tend to move together with the US and Japan. However, the statistical significance of these concordance statistics is not calculated.
According to Aguiar and Gopinath (2004), Emerging Market Business Cycles: The Cycle Is the Trend, examines the role of trend growth shocks and argue that these shocks can explain the high variability of consumption relative to output and the countercyclical current account.
According to Engel and Wang (2011), International trade in durable goods: Understanding volatility, cyclicality, and elasticities, present a two-country model with durables and nondurables and use it to study the volatility and cyclicality of exports and imports in the United States.
The model that will be used in this study to measure the emerging market business cycles in Jordan is according to the Aguiar and Gopinath (2007) , the researcher resort to the next equation:
I: is the income i at time t.
Y: is the growth i at time t.
X: is the net export i at time t.
S: is the counsamption i at time t.
i: is a low-income or middle-income country at time t.
β0 and β1 : is the coefficient of the model.
αi: is constant term of the model i.
: is the business cycle in contry i at time t.
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