Causalities among Human Capital, Investment, Openness, and Economic Growth: An Empirical Investigation for Jordan

Understanding causality is the basis for a rigorous inferential analysis, which is essential for economics. Assessing the causality of variables has immediate and important implications for the debate on economic performance and growth. The aim of the present study is therefore to test for the Granger causality between output and its most discussed determinants, namely human and physical capital, investment, and openness through using eight proxies for these variables. The study adopts a country specific focus and analyses the case of Jordan between 1980 and 2014. The empirical results point at the causal effect of openness and of secondary school enrolment (as one of the proxies for human capital) on growth. Investment causes economic growth indirectly, as private investment causes secondary schooling and public investment causes openness. Overall, the results confirm the importance of the integration in the global economy and of the investment in secondary education for developing countries.