The Impacts of Non-linear Oil Price Shocks on Saudi Savinginvestment Behavior: An Empirical Investigation

Abdulaziz Hamad Algaeed
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Abdulaziz Hamad Algaeed: Department of Economics, Imam Mohamed Bin Saud Islamic University, Riyadh, Saudi Arabia

International Journal of Economics and Financial Issues, 2017, vol. 7, issue 2, 155-165

Abstract: The purpose of this paper is to analyze theoretically and empirically the effects of a non-linear oil price shocks (OILshock) on Saudi investment-saving behavior for the period of 1985-2015, using structural vector autoregressive approach. The OILshock is calculated as SOPI, employing GARCH(1,1). Johansen's testing procedure result asserts the existence of stable long-run relationship between private saving investment (PI), OILshock, government expenditure (GOEX) and per-capita income (PERCAPITA). The findings confirm that the OILshock affect positively (+) PI. The sign is as expected and significant. Moreover, capital investment takes time to absorb the shock. Nonetheless, PERCAPITA as a proxy for aggregate demand had the right sign and statistically significant. GOEX had the positive sign reflecting the crowd-in effects. Although, Emmanuel et al. (2014), found negative impacts of OILshock on PI, our results should differ in sign because this analysis is forwarded towards an oil-exporting country.

Keywords: Investment; Saudi Arabia; A Nonlinear Oil Price Shocks; Structural Vector Autoregressive (search for similar items in EconPapers)
JEL-codes: C51 E22 Q43 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (3)

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