The role of public debt as a moderator in the relationship between revenues and capital expenditures of the Jordanian government

Abstract

This study aims to investigate the relationship between government revenue and capital expenditures in Jordan from 2003 to 2022, with public debt as the moderating variable. Utilizing data from the Jordanian Ministry of Finance’s final accounts and the Central Bank of Jordan’s reports, the study employed regression analysis techniques in the statistical software E-Views to test the study’s hypotheses. The findings reveal a positive relationship between revenue and capital expenditures, indicating the significance of revenue in determining the level of capital expenditures. Additionally, a positive relationship is observed between public debt and the magnitude of capital expenditures, suggesting that a portion of capital expenditures is covered by government revenues while the remaining portion is financed by public debt. Upon introducing the moderating variable (public debt) into the analysis, the impact of public debt on the relationship between revenue and capital expenditures becomes evident, indicating that public debt strengthens the relationship between revenue and capital expenditures. In light of the study’s findings, the government should focus on enhancing and increasing revenue and financing sources while rationalizing expenditures. Moreover, it should strive to improve its services and infrastructure to attract more investments and reduce public debt.