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Middle East and Central Asia > Jordan

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Cover IMF Working Papers
Personal Income Taxes in the Middle East and North Africa: Prospects and Possibilities
Mario Mansour
and
Eric M. Zolt
Personal income taxes (PITs) play little or no role in the Middle East and North Africa, often yielding less than 2 percent of GDP in revenue—with the exception of few North African countries. This paper examines how PITs have evolved in recent decades, and what they might look like in the next 20 years. Top marginal tax rates on labor and business income of individuals have declined substantially, a trend that mirrors reductions in advanced and developing economies. Taxation of passive capital income has changed very little, and the revenue intake from this source remains low throughout the region (less than 1 percent of GDP on average and concentrated in oil-importing non-fragile states). Social security contributions (SSC) have increased in importance in nearly all MENA countries, and some countries have introduced additional payroll taxes. The combination of reduced marginal tax rates, light taxation of income from capital and business activities, and increase of SSC, have resulted in income tax systems that create disincentives to work and incentives for informality, and contribute little to government revenue and income redistribution. Given differences in economic and political structures, demographics, and starting points, the path to PIT/SSC reforms will vary across the region. Countries with relatively mature PIT/SSC systems, where revenue performance has improved in the past two decades, will increasingly need to balance the revenue and equity objectives against effciency objectives (in particular labor market incentives and infromality). Countries with no PITs will have to weigh whether a consumption tax/SSC system that mimic a flat tax on labor income is sufficient to diversify revenue away from oil and whether to adopt PITs to address rising income and wealth inequality. Finally, fragile states, who face more political volatility and weaker fiscal institutions, will have to focus on simplicity of tax design and collection to be able to raise revenue from PITs.
Keywords:
Personal income taxes; social security contributions; payroll taxes; fragile and conflict states; Middle East and North Africa; Gulf-Cooperation Council; SSC reform; SSC system; revenue performance; PIT objective; PIT revenue; Personal income tax; Income tax systems; Income; Income and capital gains taxes; Corporate income tax; North Africa; Middle East; East Africa; Global
Cover IMF Working Papers
The Finance and Growth Nexus Re-Examined: Do All Countries Benefit Equally?
Mr. Adolfo Barajas
,
Mr. Ralph Chami
, and
Mr. Seyed Reza Yousefi
A large theoretical and empirical literature has focused on the impact of financial deepening on economic growth throughout the world. This paper contributes to the literature by investigating whether this impact differs across regions, income levels, and types of economy. Using a rich dataset for 150 countries for the period 1975–2005, dynamic panel estimation results suggest that the beneficial effect of financial deepening on economic growth in fact displays measurable heterogeneity; it is generally smaller in oil exporting countries; in certain regions, such as the Middle East and North Africa (MENA); and in lower-income countries. Further analysis suggests that these differences might be driven by regulatory/supervisory characteristics and related to differences in the ability to provide widespread access to financial services.
Keywords:
WP; MENA country; private sector; banking system; dependent variable; Growth; Financial Development; Inclusive Growth; Financial Access; MENA region; credit-GDP ratio; MENA growth underperformance; x Middle East and North Africa; x GCC; GCC grouping; MENA depth; banking sector; number of observation; bank financing; oil GDP; Credit; Oil; Personal income; Stock markets; Commercial banks; Central Asia; Sub-Saharan Africa; North Africa; Middle East; East Africa
Cover IMF Working Papers
Remittances Channel and Fiscal Impact in the Middle East, North Africa, and Central Asia
Mr. Yasser Abdih
,
Mr. Ralph Chami
,
Mr. Christian H Ebeke
, and
Mr. Adolfo Barajas
This paper identifies a remittances channel that transmits exogenous shocks, such as business cycles in remittance-sending countries, to the public finances of remittance-receiving countries. Using panel data for remittance-receiving countries in the Middle East, North Africa, and Central Asia, three types of results emerge. First, remittances appear to be strongly procyclical vis-à-vis sending country income. Second, remittances tend to be spent on consumption of both imported and domestically produced goods, rather than on investment. Third, shocks in the sending countries are transmitted via remittances to the public finances - specifically, tax revenues - of receiving countries. In the case of the 2009 global downturn, this impact was particularly strong for several countries in the Caucasus and Central Asia, whereas in the subsequent recovery in 2010 virtually all receiving countries benefitted from an upturn in remittance-driven tax revenues.
Keywords:
WP; remittance inflow; real GDP; remittance determination equation; business cycle; remittance-recipient country; Remittances; Private demand; Tax revenues; Instrumental variables; Panel data; instrumentation equation; remittance channel; remittance flow; remittances model; remittance equation; remittance effect; remittance-source region; remittance ratio; Income; Private consumption; Consumption; Global; Middle East; North Africa
Cover IMF Working Papers
Oil Prices, External Income, and Growth: Lessons From Jordan
Mr. Mehdi Raissi
and
Mr. Kamiar Mohaddes
This paper extends the long-run growth model of Esfahani et al. (2009) to a labor exporting country that receives large inflows of external income?the sum of remittances, FDI and general government transfers?from major oil-exporting economies. The theoretical model predicts real oil prices to be one of the main long-run drivers of real output. Using quarterly data between 1979 and 2009 on core macroeconomic variables for Jordan and a number of key foreign variables, we identify two long-run relationships: an output equation as predicted by theory and an equation linking foreign and domestic inflation rates. It is shown that real output in the long run is shaped by: (i) oil prices through their impact on external income and in turn on capital accumulation, and (ii) technological transfers through foreign output. The empirical analysis of the paper confirms the hypothesis that a large share of Jordan's output volatility can be associated with fluctuations in net income received from abroad. External factors, however, cannot be relied upon to provide similar growth stimuli in the future, and therefore it will be important to diversify the sources of growth in order to achieve a high and sustained level of income.
Keywords:
WP; interest rate; price boom; Growth models; long-run relations; Jordanian economy; remittances; foreign direct investment; oil price shocks; foreign output and inflation shocks and error correcting relations; output equation; co-trending restriction; test statistics; external income; error correction term; Fisher equation; error correction term of the long-run output equation; least squares; LR statistic; error-correction equation; oil income; multiple correlation coefficient; Oil prices; Personal income; Inflation; Oil; Purchasing power parity; Global
Cover IMF Working Papers
Remittances: An Automatic Output Stabilizer?
Ms. Dalia S Hakura
,
Mr. Ralph Chami
, and
Mr. Peter J Montiel
Remittance flows appear to be falling worldwide for the first time in decades as a result of the ongoing financial turmoil. It is suspected that the drop in remittance income into developing and emerging markets will have a destabilizing effect on these economies. The paper estimates the impact of remittances on output stability for countries that are dependent on these income flows. Using a sample of 70 countries, including 16 advanced economies and 54 developing countries, we find robust evidence that remittances have a negative effect on output growth volatility of recipient countries. This result supports the notion that remittance flows are a stabilizing influence on output. Thus, the fall in remittances precipitated by the ongoing global financial crisis could potentially increase output variability in recipient countries. This would present a hard challenge for governments in those countries already suffering from the crisis: they must resort to an already stressed and limited set of policy instruments, such as fiscal policy, to counter the resulting adverse economic and social impacts of lower remittances.
Keywords:
WP; remittance; remittance flow; GDP; remittance inflow
Cover IMF Working Papers
The Magnitude and Distribution of Fuel Subsidies: Evidence from Bolivia, Ghana, Jordan, Mali, and Sri Lanka
Mr. Robert Gillingham
,
David Locke Newhouse
,
Mr. David Coady
,
Mr. Kangni R Kpodar
,
Moataz El-Said
, and
Mr. Paulo A Medas
With the recent jump in world oil prices, the issue of petroleum product pricing has become increasingly important in developing countries. Reflecting a reluctance of many governments to pass these price increases onto energy users, energy price subsidies are absorbing an increasing share of scarce public resources. This paper identifies the issues that need to be discussed when analyzing the fiscal and social costs of fuel subsidies. Using examples from analyses recently undertaken for five countries, it also identifies the magnitude of consumer subsidies and their fiscal implications. The results of the analysis show that-in all of these countries-energy subsidies have significant social and fiscal costs and are badly targeted.
Keywords:
WP; fuel price; petroleum products; price rise; formula price; oil price
Cover IMF Working Papers
Business Cycles and Workers' Remittances: How Do Migrant Workers Respond to Cyclical Movements of GDP At Home?
Mr. Serdar Sayan
Workers' remittances are often argued to have a tendency to move countercyclically with the GDP in recipient countries since migrant workers are expected to remit more during down cycles of economic activity back home. Yet, how much to remit is a complex decision involving other factors, and different variables driving remittance behavior are differently affected by the state of economic activity over the business cycle. This paper investigates the behavior of workers' remittances flows into 12 developing countries over their respective business cycles during 1976-2003 and finds that countercyclicality of receipts is not commonly observed across these countries.
Keywords:
WP; remittance; role remittances play; remittance behavior; spending; workers’ remittances; business cycles; consumption vs. investment motive; remittance receipt; remittances cycle; remittances series; workers' remittance; Bangladesh's remittances receipt; remittance flow; Remittances; Migrant labor; Income; Procyclicality; Africa; Middle East
Cover IMF Working Papers
The Role of Affordable Mortgages in Improving Living Standards and Stimulating Growth: A Survey of Selected Mena Countries
Mr. Frank E. Nothaft
and
Mr. S. Nuri Erbas
This paper argues that making affordable home mortgage loans available to a large cross section of the population will serve both the redistributive and growth-enhancing objectives of poverty reduction policies. The current state of housing and mortgage markets in selected Middle East and North Africa (MENA) countries (Algeria, Egypt, Jordan, Morocco, and Tunisia) is examined. The study evaluates Turkey and Mexico as middle-income comparator countries. Historical experience of the United States is also described. Simulations based on U.S. parameters provide some guide to the effects on economic growth of alleviating housing shortages by improving access to mortgage financing.
Keywords:
WP; housing construction; term housing finance facility; mortgage lending; commercial bank; down payment; mortgage finance market; housing supply; mortgage finance availability; growth; poverty; secondary mortgage market; construction initiative; production program; mortgage financing; insolvent public sector housing institution; housing demand; government housing policy; Housing; Mortgages; Housing prices; Loans; Income; Middle East; North Africa; East Africa; Maghreb
Cover Equity and Efficiency in the Reform of Price Subsidies
Equity and Efficiency in the Reform of Price Subsidies
A Guide for Policymakers
Mr. Juan P Cordoba
,
Mr. Robert Gillingham
,
Mr. Sanjeev Gupta
,
Mr. Ali M. Mansoor
,
Mr. Christian Schiller
, and
Marijn Verhoeven

Abstract

This text provides guidance to policymakers on how to design and implement sound price-subsidy reforms. It draws on the experience of price-subsidy reform in 28 countries. The authors discuss economic and political considerations and make several recommendations concerning the speed of reform and social protection mechanisms. They discuss how the social impact of reform can be limited by establishing cost-effective and well-targeted temporary social protection mechanisms, and how governments can reduce the risk of political disruption by distributing the initial burden of reform fairly and by clearly explaining the costs and benefits to the public.

Keywords:
M&G; price-subsidy reform; price; subsidy; price subsidy; compensation scheme; price-subsidy policy; price change; reform measure; household income; Income; Inflation; Government subsidies; Social assistance spending; Household consumption; Middle East; Africa; East Asia; North Africa; Asia and Pacific; Western Hemisphere; Central Asia; Europe; Global; budgetary saving; Housing; Currencies
Cover IMF Staff Papers
IMF Staff papers: Volume 42 No. 2
International Monetary Fund. Research Dept.
This paper develops an endogenous growth model of the influence of public investment, public transfers, and distortionary taxation on the rate of economic growth. The growth–enhancing effects of investment in public capital and transfer payments are modeled, as is the growth–inhibiting influence of the levying of distortionary taxes that are used to fund such expenditure. The theoretical implications of the model are then tested with data from 23 developed countries between 1971 and 1988, and time series cross sectional results are obtained that support the proposed influence of the public finance variables on economic growth.
Keywords:
SP; review subscription; Basle capital rule; rate of growth; priority mail delivery; panel database; income growth; productivity coefficient; Inflation; Personal income; Stock markets; Value-added tax; Middle East; Africa; Asia and Pacific; Eastern Europe; Southern Africa; West Africa; Global; East Africa