Effects of Saudi Arabia’s economic reforms: Insights from a DSGE model

Jorge Blazquez (), Marzio Galeotti, Baltasar Manzano, Axel Pierru and Shreekar Pradhan

Economic Modelling, 2021, vol. 95, issue C, 145-169

Abstract: Saudi Arabia’s Vision 2030 includes the creation of a value-added tax (VAT), the enactment of domestic energy price reforms, and the deployment of renewable energy. We assess these policy measures’ effects on macroeconomic variables using a dynamic general equilibrium model of the Saudi economy. We find that energy price reforms deliver long-run welfare gains that are more than 20% of current consumption, the greatest among the three measures. Introducing a VAT generates welfare gains of up to 4.3% of current consumption. The welfare effects of renewable energy deployment are sensitive to the selected financing scheme. If financing for renewables comes from a reduction in government consumption or transfers to households, no welfare gains are realized. Jointly implementing all three policies increases real gross domestic product (GDP) by 5%, reduces real non-oil GDP by up to 1.8%, and increases welfare by 23.5%–32.4%.

Keywords: Saudi Arabia; Dynamic stochastic general equilibrium model; Vision 2030; Value added tax; Energy price reform; Renewable energy (search for similar items in EconPapers)
JEL-codes: D58 E13 E62 E65 H30 H50 Q43 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:95:y:2021:i:c:p:145-169

DOI: 10.1016/j.econmod.2020.12.004

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