The Determinants of Financial Development in Jordan: VECM

In the economies of countries, financial development (FD) is considered very significant, since the existence of a sophisticated financial system that works to diversify the means of financing for different economic sector which is reflected positively on economic growth.The more the state has a well-developed financial system, the more in economic improvement.Countries with developed financial systems offer for them many advantages in the economy where it provides advance information on available investments, and helps to optimize the distribution of financial resources available in the economy, which controls the projects and promotes corporate governance by providing the necessary funding.Also, Financial development helps promote trade, diversification and risk management, and increases savings and exchanges in the economy.Recent theories suggest that financial development is important for the growth of the economies of countries.Levine and Zervos (1998) show that the improvement of banking system and stock market are led to growth of economy.In this context Auerbach and Siddiki (2004) wrote that the availability of advanced financial systems contributes to increasing the productivity of the resources used and increasing the savings rates in the economy necessary for investment.In this context Pradhan (2010) also wrote financial expansion is now a key symbol of economic progress and prosperity.Financial systems are also considered as the backbone of economic systems.Jordan, like other developing countries, continuously seeks to develop financial and legal legislation and provide supervisory bodies on the operating of the banking system, Amman Stock Exchange Market and companies, and so are the recent Central Bank of Jordan has adopted the so-called financial inclusion, which seeks to include all the people in banking services in order to promote the banking system in Jordan.Identifying factors that affect (FD) is an important priority for countries aiming to achieve high and sustained rates of economic growth.Due to the great difference in the circumstances available to countries for financial development.Therefore, we can say that it is necessary to conduct experimental studies on the factors that affect the financial development in Jordan as well as to make appropriate recommendations that will contribute to the (FD) in Jordan.Financial progress has a great position in the economies of countries.The advanced financial system works to collect savings and redistribute them efficiently to the various economic and service sectors in order to ensure the desired economic development in the countries.In addition to trying to uncover the variables that effectively affect Jordan's(FD), as well as reaching appropriate recommendations that may enhance financial progress in Jordan.Most of the previous studies dealt with the impact of financial and commercial openness on financial development, while others dealt with a number of variables such as the size of the capital market, economic growth, inflation, population growth rate, the number of people enrolled in higher education, and public spending as determinants of financial development.A number of techniques were used in analysis such as Autoregressive Distributive Lag (ARDL) approach, Panel data analysis, cointegration and causality analysis.It is clear that the previous published studies fail to consider tax revenues as one of the determinants of financial development.This situation is unacceptable, because tax revenues negatively affect economic performance and therefore financial development.Tax revenue is a reflection of financial policies.So high tax revenue has negative effects on demand