Abstract

This study examines the impact of the degree of trade openness, real exchange rate (RER) and the level of imports on the production of the manufacturing sector in Jordan for the monthly period (1992-2012). This study applies the Chow test for structural changes. The results show that the year 2000, when Jordan officially joined the World Trade Organization (WTO), represents a year of structural change. Thus, the study has divided the full period into two sub-periods. In addition, the results of the study indicate the absence of a cointegration relationship over the period leading up to Jordan's accession to the WTO. The period that follows the trade openness has shown the presence of cointegration and long-term relationship among the variables. Specifically, for the second period, the study found that the degree of trade openness has a positive and a statistically significant effect on the manufacturing production. Therefore, the study recommends that the government continue to support the manufacturing sector and not to raise any input costs on it, especially given the relatively high cost of fuel and electricity. This should keep the competitiveness of this sector relatively high.

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