Author(s): Mohamed Ibrahim Mugableh, Mohammad Salem Oudat
This paper models the variables that affect foreign portfolio investments in Jordan for the period of 1978-2016. To fulfil to goals of the paper, autoregressive distributed lag approach and vector error correction model have been employed. Results show the existence of co-integration between foreign portfolio investments and their determinants (i.e., domestic market capitalization, foreign direct investments, money supply, and government expenditures). Granger causality based on vector error correction model shows bidirectional causality among variables in long-run and short-run. However, the results of this paper provide different recommendations to policy makers in Jordan’s government.