THE IMPACT OF TRADE ACCOUNT DEFICIT ON UNEMPLOYMENT SCENARIO: AN EMPIRICAL STUDY ON JORDAN DURING THE PERIOD OF

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1 THE IMPACT OF TRADE ACCOUNT DEFICIT ON UNEMPLOYMENT SCENARIO: AN EMPIRICAL STUDY ON JORDAN DURING THE PERIOD OF Khaled Mohammed Al-Sawai'e, PhD Economics Deparmen, Faculy of Economics and Adminisraion, Zarqa Universiy Shereen Abdul A'aL, PhD Absrac The aim of his paper is o sudy he shor-erm causal relaionship beween unemploymen and he volume of rade defici in jordan for he period 2000:0 202:02. This sudy provides evidence of he absence of a long-erm relaionship beween he wo variables. We use granger causaliy es and propose an augmened dickey-fuller (adf) coefficien es for deecing he presence of a uni roo in he model. The resuls show ha rade accoun defici causes unemploymen, and unemploymen causes he rade accoun defici in he shor run. This indicaes ha rade liberalizaion is also able o increase impors, decrease aggregae produciviy in he differeniaed secors, and creae inefficiency on economic performance. Thus, his would simulaneously decrease employmen opporuniies for jordan s labour force. Trade accoun can also be an addiional negaive effec in increasing jordanian s unemploymen scenario in he fuure. Keywords: Unemploymen, rade accoun, Jordan Inroducion Jordan has one of he highes raes of human developmen a he Arab level in erms of high level of educaion and healh care. However, i faces a growing unemploymen problem affecing young people in paricular. Social official figures show ha unemploymen in Jordan ranges a he rae of 3%. Consequenly, i appears o worsen as a resul of is growing populaion of abou a million and a quarer million ciizens who are beween he age of en 4 This research is funded by he Deanship of Research in Zarqa Universiy /Jordan 38

2 and nineeen. Thus, his growing populaion hreaens boh he socioeconomic and sociopoliical environmen. Economiss aribue he exisence of deflaionary gaps and he accompanying unemploymen raes o be above normal in Jordan due o inernal and exernal facors. Inernally, he behavioral paerns ha lead young people o absain from work in cerain professions in addiion o he srucural imbalances in he labor markes is one of he major causes of unemploymen. On he exernal level, economic recession occurred due o poliical insabiliy over he las hree decades, in addiion o migraions from neighboring Arab counries such as Iraq and Syria (Arouri, 2008). Anoher ension has begun o emerge in he Jordanian economy. Thus, a rade balance defici side by side wih low volume of expors, all reflecs an imporan economic indicaor in Jordan, and mos noably he issue of unemploymen. Beween 990 and 2000, Jordan has recorded unsable rade balance and his happened due o global economic crisis, such as financial crisis in 997. Consequenly, chronic defici in he balance of rade for Jordan reached million Jordanian dinars in 990, and hen coninued o rise up o 505 million dinars in 2007 (Momani, 995). Furhermore, he conracion in rade accoun due o economic crisis coninued o grow, as shown in Figure (). This has generaed a large volume of boh heoreical and empirical lieraure. However, mos of hese sudies have paid more aenion o developed counries (Moore and Ranjan, 2005; Poro, 2008; Felbermayr, Pra and Schmerer, 20; Nanhakumar and Sukemi, 20). Jordanian Trade Accoun Defici (Million Dinars) Figure () The dynamic inegraion beween rade accoun and unemploymen scenario has been a opical issue. Considering his background, idenifying he reflecion of unsable rade accoun growh raes on unemploymen scenario in Jordan has become of grea imporance. 39

3 This paper will conribue significanly o he lieraure by providing new evidence on Granger causaliy relaionship beween rade accoun and unemploymen in Jordan. We will use he innovaed causaliy es proposed by Granger; hus, he causaliy es is considered as an imporan saisical es which deermines he direcion of he relaionship beween economic variables, and allows he verificaion of he direcion of he relaionship beween he variables of ime-series models (Gujarai, 2003). The purpose of his echnique is o evaluae he relaive imporance of rade accoun and inflaion variables in he movemens of unemploymen. In conras wih he previous individual-counry level researches, his paper is one of he rare sudies addressing he asymmerical inegraion beween rade accoun and unemploymen dynamics for Jordan. This is done using Granger causaliy es analysis, he mulivariae coinegraion es, he error correcion procedure, and he impulse response analysis. Our sample will cover he quarerly daa from 2000 o 202. The res of he paper is organized as follows: secion 2 covers he heoreical framework, secion 3 conains he relaed empirical evidence, secion 4 deals wih daa and mehod, secion 5 presens he resuls and discussion, while secion 6 conains he concluding remarks. Theoreical Framework This sudy will focus on esing and inerpreing rade accouning and he phenomenon of unemploymen in Jordan using a sandard model based on macro-economic heories. Specifically, he Okun law linking he rae of real economic growh and he unemploymen rae, and he main predicion for his imporan law ha increased growh raes in real producion will reduce he unemploymen rae by a facor of sensiiviy equal o half. For example, an economic growh rae of 6% per annum will reduce he unemploymen rae o 3% per annum. On he oher hand, Phillips Curve heory linking unemploymen and inflaion raes involves an opposie relaionship exising beween he wo in he shor erm. Therefore, he significance of his relaionship has implicaions wih regard o he opions and he effeciveness of macroeconomic policies adoped in Jordan. Relaed Empirical Evidence The role of rade liberalizaion in macroeconomic dynamics (specifically afer 970s) has generaed large volumes of empirical sudies wih mixed findings using cross secional ime series and panel daa. Mos of he global sudies are focused on rade liberalizaion, rade openness, and he effecs of globalizaion on labor marke sabiliy. Neverheless, he local sudies deal only wih he problem of unemploymen. Consequenly, few of he sudies are seleced for review as follows: Krugman (98) and Meliz 320

4 (2003) assumed homogeneous workers and full employmen, and hus predic ha all workers win from rade liberalizaion. Meanwhile, Shapiro and Sigliz's (984) linked produc markeing mix o labor marke churning. I showed ha workers care abou heir jobs because he model feaures aggregae unemploymen and jobs ha pay differen wages o idenical workers. Simulaions show ha for reasonable parameer values, as much as one-fourh of exising good jobs may be desroyed via liberalizaion. Papageorgiou, Choksi and Michaely (990) sudied he benefis of rade liberalizaion on unemploymen in 9 counries. The finding showed ha rade liberalizaion did no increase unemploymen rae in he manufacuring secors of he economy. Dollar and Collier (200) recognized a significan ransiional correlaion beween rade liberalizaion, skill premium, and wage inequaliy. Moore and Ranjan (2005) using a cross secional daa, concluded ha he effec of rade on overall unemploymen scenario is ambiguous. Du e al. (2009) invesigaed he effec of rade on unemploymen and presened a model of rade and search induced unemploymen. Here, rade resuled from Heckscher-Ohlin (H-O) and Ricardian comparaive advanage. Using cross counry daa over he period on rade policy, unemploymen, and various conrols while conrolling endogeneiy and measuremen error problems, his sudy found a srong evidence for he Ricardian predicion which saes ha unemploymen and rade openness are negaively relaed. This effec dominaed he posiive H-O effec of rade openness on unemploymen for capial abundan counries, which urns negaive for labor-abundan counries. Bjornsad and Skjerpen (2006) sudied he relaionship beween rade and inequaliy in wages and unemploymen in Norway. The moivaion for his sudy is ha increased globalizaion has shifed demand owards skilled labor a he expense of unskilled labor in developed counries. By using a large macro economeric model wih heerogeneous labor, his sudy showed ha he downward pressure on impor prices has increased skill mismach and somewha surprisingly decreased wage differenials. Menezes-Filho and Muendler (2007) found ha Brazil s rade liberalizaion in 990s led o he displacemen of formally employed workers from proeced indusries and ha comparaive advanage indusries did no absorb rade displaced workers in full. Therefore, his indicaed ha rade liberalizaion was associaed wih ransiions o unemploymen cases in Brazil. Besides ha, Poro (2008) examined he links beween rade liberalizaion and unemploymen in Argenina. The findings of his sudy showed ha, an increase in agro-manufacured expor produc lead o boh 32

5 lower unemploymen rae and increase labor marke paricipaion rae. In addiion, wages also increase given an increase in expor prices. Hasan e al. (20) invesigaed he relaionship beween rade liberalizaion and unemploymen in India. The resuls showed ha here is no evidence of any unemploymen increasing effecs of rade reforms. The sae level analysis revealed ha urban unemploymen declined wih liberalizaion in saes wih flexible labor markes and larger employmen shares in ne exporer indusries. Moreover, he indusry level analysis indicaed ha workers in indusries experiencing greaer reducions in rade proecion were less likely o become unemployed, especially in ne expor indusries. The empirical resuls provided suppor for rade liberalizaion along wih complemenary reforms in domesic policies. Felbermayr, Pra and Schmerer (20) observed he relaion beween rade and unemploymen for 20 rich OECD counries. This sudy used panel daa and pure cross-secional daa on a larger se of counries. The ime srucure of he panel daa allowed he conrol of unobserved heerogeneiy, whereas cross-secional daa made i possible o use openness hrough is geographical componen. In boh seups, he daa of business cycle effecs include a hos of insiuional and geographical variables, and conrol wihin he counries rade. The main finding esablished an empirical regulariy, where rade openness does no increase srucural unemploymen in he long run. Thus, his signifies ha i is robus o various definiions of unemploymen raes and openness measures. The benchmark specificaion suggesed ha a 0% poin increase in oal rade openness reduced aggregae unemploymen by abou hree quarers of % poin. Al-Dairi (2004) linked inflaion wih unemploymen in Jordan. I used cross counry daa over he period The empirical resuls provided suppor for a srong posiive relaion. Arouri (2007) observed he problem of unemploymen in Jordan, and discussed wheher or no foreign direc invesmen would help in solving he problem of unemploymen in Jordan. The empirical resuls indicaed no exisence of conribuing foreign direc invesmen o he reducion of unemploymen rae in Jordan. Neverheless, his is parly due o being a capial-inensive invesmens and is reliance on foreign labor significanly. Finally, Awad (20) sudied unemploymen issue in Jordan over he period This sudy included an imporan resul which saes ha a real economic growh rae of 25% is required o reurn unemploymen raes in Jordan from he curren level (4%) o normal level (4%). This showed how difficul i is o achieve his goal. Mos of previous sudies focused on rade openness which is measured using empirical formaion of impor plus wih expor relaive o nominal gross domesic produc (Dinopoulos and Thompson, 2000; Alcalá 322

6 and Ciccone, 2004). Alhough he rade openness measure reflec he acual exposure of an economy and are easily measurable, i does no indicae he real effec of he rade sabiliy of a naion. Therefore, in his sudy, we employ he volume of rade accoun o ensure ha he effecs of rade sabiliy can be measured collecively. The main objecive of his paper is o es for he direcion of causaliy beween rade accoun and unemploymen in he case of Jordan. This paper will be able o conribue significanly o he lieraure by providing new evidence on Granger causaliy relaionship beween rade accoun and unemploymen in Jordan. We used innovaed causaliy es proposed by Granger (969) o es he direcion beween he wo variables. In his relaion, he focus of his sudy is o invesigae boh he long run and shor run relaionship beween rade accoun and unemploymen in Jordan over he period from 0/2000 o 02/202. However, Figure 2 shows unemploymen raes among Jordanian labor force according o gender. Moreover, he sudy examines Granger causaliy beween rade accoun and unemploymen. I uses commodiy erms of rade and income erms of rade. The Dickey and Fuller (979) uni roo es saisic is used o examine he saionariy of he daa. The Johansen (99) coinegraion mehod is used o examine he long-run relaionship beween rade balance and unemploymen. In addiion, he impulse response analysis is used o show he impac of he shock rading balance. 40 Unemploymen Raes among Jordanian Labor Force by Sex for Seleced Years Male Female Toal % Figure (2) Unemploymen Rae Source: Daa unemploymen in Jordan, various surveys, he Deparmen of Saisics. Daa and Mehod Daa The daa used for his sudy are basically ime series covering The daa were sourced from Cenral Bank of Jordan (CBJ) and he Deparmen of Saisics (DOS). 323

7 Model Specificaion The economeric echnique employed in his sudy is a mulivariae coinegraion and error correcion procedure wih he hypohesis ha unemployed labor is a funcion of rade balance. Based on he heoreical argumens presened in he lieraure, he relaionship beween rade balance and unemploymen can be specified as follows: UE = f ( TB )... Where UE is logarihmic value of unemployed labor in Jordan and TB refers o logarihmic value of rade balance volume for Jordan. Daa for variables of ineres were convered ino naural logarihms so ha hey can be inerpreed in growh erms afer aking he firs differen. Before conducing causaliy es, we begin our esimaion by performing he uni roo analysis using Augmened Dickey-Fuller (ADF) es. This is imporan o avoid he spurious regression and random walk problems. In addiion, saionary ess will be conduced for each variable o ensure hey are saionary. The simples version of he model o be analyzed is he random walk as shown in equaion (2): 2 y = γy- + ε where ε ~ N[ 0, σ ]... 2 Where, γ symbol denoes ime rend, y is he variable in esimaion procedure, and ɛ represens he disribued random error erm wih zero value of mean and consan variance. The sandard Dickey-Fuller es is conduced by esimaing he following regression equaion: y = α + β + δy + ε...3 Where is he differencing operaor, y represens he variables o be esimaed (i.e. LRUE, LTB ), which is consan, β is he rend coefficien, ɛ is he whie noise residual of zero mean and consan variance, and is he ime or rend variable. The null and alernaive hypoheses may be wrien as follows: H 0 : δ = 0 Ha : δ 0...4a Acceping he null implies here is a uni roo (he series is nonsaionary); whereas rejecing he null implies Y is a saionary ime series. According o Rao (994), he problem associaed wih he simple Dickey-Fuller uni roo could be avoided by running he ADF es, which is derived from he regression equaion: y m = α + β + δy + γ i y + ε... 4 i= b 324

8 Where y - is equal o (y - - y -2 ), and m is he maximum lag lengh on he dependen variable o ensure ha ɛ is he saionary random error. The null hypohesis of a uni roo is rejeced if he -saisic associaed wih he esimaed coefficiens exceeds he criical values of he es. Furhermore, he ADF specificaion accouns for possible auocorrelaion in he error process ɛ hrough he lagged dependen variable on he righ hand side. The pracical rule for esablishing he value of m (i.e. he number of lags) is ha i should be relaively small in order o save various degrees of freedom, bu sufficien o remove serial correlaion in he residuals. The weakness in his es is ha he power of he es may be adversely affeced by miss-specifying he lag lengh (Rao, 994). The nex sep is o find ou wheher he variables share a common sochasic rend, i.e. o es wheher wo or more variables are coinegraed. Coinegraion can be regarded as he empirical counerpar of he heoreical noion of a long run relaionship among he variables. In oher words, a coinegraion of wo or more variables suggess ha here is a long run, or equilibrium relaionship beween he variables (Rao, 994). Coinegraion echnique provides a means of idenifying and avoiding spurious regressions generaed by non-saionary series. When variables are coinegraed, he OLS esimaes from he coinegraing regression will be super-consisen. Afer ha, we seek in his sudy o deermine he long run relaionship beween rade balance defici and unemploymen. Thus, he Johansen (99) mulivariae coinegraion es will be employed, which involves hree seps (5). The Johansen procedure no only deermines he number of coinegraing vecors, bu also provides esimaes of he vecors. For he purpose of esing he number of coinegraing vecors, Johansen and Juselius (988, 990) propose he use of wo likelihood raio es saisics namely, he race es and he maximum eigenvalues es. The race saisic for he null hypohesis of r coinegraing relaions is compued as follows: m [ ]... a τ race ( r) = T log λ 5 i= The maximum eigenvalue saisic ess he null hypohesis of r coinegraing relaions agains r+ coinegraing relaions. Thus, i is compued as follows: τ r, r + ) = T log λr... 5 max ( + ( ) b (5) For an inuiive insigh ino he Johansen mehod, refer o: Johansen, S. (988). Saisical Analysis of Coinegraion Vecors; Journal of Economic Dynamics and Conrol, 2(2),

9 If variables are coinegraed, an error correcion model exiss. Error Correcion Model ECM combines boh he shor run dynamics and long run properies, and a he same ime eludes he spurious regression problem. However, he VECM can be expressed as follows: a b DLRUE = α 0 + αdlrue i + α 2 DLRTB + γz y + ε... 6a i= i= m n = β 0 + βdlrtb i + α2dlrue + γz x + ε... 6 i= i= DLRTB Where, Z y- and Z x- represen he error erms lagged by one period for he real rade balance and unemploymen equaions, respecively. The coefficien γ measures he long run equilibrium relaionship, while α and β measures he shor run causal relaion. Resuls This sudy examines he degree of inegraion of he variables of Augmened Dickey Fuller es (98) for he saemen wheher variables are saionary or no. This es is performed a he firs difference and he second difference levels which inercep ogeher wih a consan and rend. The resuls of ADF es is presened in Table (), which shows he fac ha all he variables appear o be inegraed in an order of zero (i.e. I(0)). Accordingly, he resuls of he uni roo ess show ha he variables are no able o rejec he null hypohesis a heir levels. Afer applying he firs differencing, only UE was able o rejec he null hypohesis. Table : Augmened Dickey Fuller Tes (Variables logarihm) Variables Model ADF lags Augmened Dickey Fuller es for levels Trade accoun TB Wih a consan and wihou a * rend Unemploymen UE consan and a rend *** 2 Augmened Dickey Fuller es for Firs Difference Trade accoun TB Wih a consan and wihou a 6.900*** 0 rend Unemploymen UE Wih a consan and wihou a 4.340*** rend Noe : (*), (**), (***) indicae he rejecion of null hypoheses in a level of 0%, 5%, and % respecively. The nex procedure is o es for coinegraion. The Johansen procedure (988, 995) was used for deecing he number of coinegraing vecors. Since Johansen mehod is sensiive for auocorrelaion in residuals, b 326

10 i will be deermined by he appropriae lag lenghs o esimae a model ha is no suffering from auocorrelaion problem. Schwarz crierion (978) is used o deermine he lag lengh periods (lagged one period), and for esing auocorrelaion lenghs for a specific lag (6). In choosing he accepable es of coinegraion, we use Panula (989) principle for deermining he coinegraion rank. Resuls were esimaed and presened in a saisical race as shown in able (2), which shows ha model (2) is he preferred model. Accordingly, he resuls of model (2) repor ha here is a coinegraion beween he variables. Table 2: Coinegraion Rank and Model Selecion: Trace Saisics Model 2 Model 3 Model 4 (Wihou Consan Wihou rend ) in CE and wihou Consan or rend in VAR Consan in CE & VAR and wihou rend in CE and VAR Consan in CE & VAR and a liner rend in VAR R VAR Lag Order Selecion Crieria: SIC (Lag 2) (20.26)* 8.63(5.49) 33.00(25.87) 2.82(9.6) 2.75(3.84) 2.86(2.5) Noe :Figures in parenheses represens he criical value a he level of significance of 5%. * Includes he firs case we encouner; hus, we canno rejec he null hypoheses Table (3) indicaes ha he saisical race and maximal eigenvalue ess confirm hese resuls. Since he variables are coinegraed, he vecor error correcion model (VECM) was used (7). Table 3: Coinegraion Tes Resuls Null Hypoheses The Opimal Lag Saisical Tes Trace Tes Eigenvalues Tes 2 r = * r Table (4) specifies he resuls of he causaliy es, and he degree of significance for he error erm of he dependen variable. I shows ha he error erm of he growh of he balance defici (as a dependen growh) is insignifican a he 0% level. Therefore, he growh of unemploymen does no cause he rade balance defici over he long erm. I also shows ha he error erm of he growh in unemploymen (as a dependen variable) is (6) I is defined as -2L m + mlnn; where n is he sample size, L m is he maximized loglikelihood of he model, and m is he number of parameers in he model. The index akes ino accoun boh he saisical goodness of fi and he number of parameers ha have o be esimaed o achieve his paricular degree of fi, by imposing a penaly for increasing he number of he parameers. (7) For more deails, refer o Phillips, and Ouliaris (990). Asympoic Properies of Residual Based Tess for Coinegraion, Economerica 58,

11 insignifican a he 0% level; hence, his implies ha rade balance defici does no resul o long erm unemploymen. Given he parameers which lagged he growh of variables, i is possible o observe a shor erm relaionship. However, he coefficien which lagged he growh of he rade defici showed saisically significan difference a % significance level of he growh of unemploymen equaion. However, he coefficien beween he growh of unemploymen in he growh equaion rade balance defici which is saisically significan a he % level of significance, implies ha unemploymen is imporan in influencing he growh of he rade balance defici in he shor erm. Also, rade balance defici emerges as an imporan facor in influencing he growh of unemploymen in he shor erm. Table 4: Resuls of Granger Causaliy in mulivariae, Summary Saisics, Trade Accoun Defici Unemploymen Growh Dependen Variable ECT Growh Lagged Lagged Trade accoun defici growh -.425*** Unemploymen growh 9.763*** (*), (**), (***) indicae he moral degree of %, 5%, and 0% respecively. Noe: Numbers are he calculaed value for saisical χ 2 The Auocorrelaion LM Tes acceped he null hypohesis ha here is no serial auocorrelaion. The equaion is sable during he sudy period, and his was confirmed by esing AR Roos Graph which displays five roos inside he circle. However, his indicae ha he model was sable and mees he requiremens for sabiliy as shown in Figure (3). Therefore, his model does no require any modificaion..5 Inverse Roos of AR Characerisic Polynomial Figure (3) 328

12 To complee he sudy of he mulivariae causaliy relaionships, and o have a beer undersanding of he dynamics of relaionships, especially how shocks are ransied and how long i akes he end of he impac of rauma, i is very useful o examine he effecs of shocks o sample sysem variables. However, his is aim a analyzing he dynamic characerisics of he model when he relaionship coinegraion ineracive relaionship beween variables using impulse response funcion and variance decomposiion of he variables are esimaed in he model. The response funcion shows pahs of each variable response o a shock in order o ake ino accoun he shor erm adjusmen in reaching he long erm balance of he dependen variable. Consequenly, i provides a mehod of analyzing he componens of variance informaion on how a response happens. Furhermore, racking response funcion affecs shock variable and separaes he analysis componens; hus i provides analysis componens wih conras informaion abou he relaive imporance of each random shock in influencing variables in he VAR. This sudy provides analysis of variance componens explanaory power for he rade balance defici and unemploymen. The variance componens were calculaed along he 50 period o capure he effec of changing he rade balance defici on unemploymen and he rade balance. Table (5) shows he resul of he analysis of variance componens, where he second column conains he sandard error (S.E) for a rading balance accoun expecaions and unemploymen forecas horizon. Also, he remaining columns show he percenages of he differen rading balance as a resul of unemploymen variable. Table (5) shows ha he rading balance is wice he impac of unemploymen on he value of he rade balance for 50 periods. However, i reached he highes conras raio of 5.76%. In addiion, he rade balance can change he unemploymen raes increase from % in he second period, o 28.97% afer 8 periods, and finally o 7.967% afer 50 periods. Table 5: Summary Saisics, Variance Decomposiion of LTD Variance Decomposiion of LUN Period S.E. LUN S.E. LTD

13 The nex procedure is o use he impulse response analysis which esimaes he impac of one variable inerpreaion on he dependen variable for several fuure periods. Therefore, in his sudy, we sudied he impac of he shock rading balance on unemploymen, apparenly o increase sandard deviaion. As a resul, an increased change defici of curren rade balance in subsequen periods hrough he model srucure VAR, were obained on he average response and he conras beween he rade balance defici for 50 fuure period. The change order variables may aler he reacions, and he economic logic in he order of variables is no unique. Hence, i can provide differen inerpreaions when relocaion variables did no ge reacions replacemen order of variables o see if he resuls change significanly or no. Figure (4) shows a graph of impulse responses for he ime inervals (50 for he period 2000Q o 202Q2) for lags of o 50. Figure 4 (a) graphs shows he impulse response for inerval LTD agains he impulse response values for inerval LUN for lags of o 50. Figure 4 (b) graphs shows he impulse response values for inerval LUN agains he impulse response values for inerval LTD for lags of o 50. Therefore, he rading balance response o one uni pulse is equal o one sandard deviaion of he variable unemploymen up o 50 periods. Figure (4) shows ha unemploymen in response o he shock rading accoun is significan afer wo periods, and i shows he impac of shock rading balance which is sabilized afer period. This means ha he impac of unemploymen is significan on he rade balance in Jordan afer wo periods, and ha he impac of he shock rading balance is seled afer period. 330

14 .08 Response o Cholesky One S.D. Innovaions Response of LUN o LTD Response o Cholesky One S.D. Innovaions Response of LTD o LUN Time Horizon )b) Figure (4) Time Horizon (a( Conclusion The resuls of he sudy indicaed he absence of a long erm relaionship beween he wo variables. This sudy invesigaed he causal relaionship beween shor-erm unemploymen and he volume of he rade defici in Jordan for he period 0/ /202. The resuls indicaed ha rade accoun defici causes unemploymen, and unemploymen causes he rade accoun defici in he shor run. Neverheless, he causal relaionship of increasing he rade defici is able o increase unemploymen rae in Jordan. This indicaes ha rade liberalizaion is also able o increase impors, decrease aggregae produciviy in he differeniaed secors, and creae inefficiency on economic performance. However, his would simulaneous 33

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