Saving and investment in Saudi Arabia: an empirical analysis

Reetu Verma and Ali Salman Saleh

Studies in Economics and Finance, 2011, vol. 28, issue 2, 136-148

Abstract: Purpose - This paper examines the long‐term relationship between saving and investment as a criterion for assessing international capital mobility for the case of Saudi Arabia, the largest economy among the Middle Eastern and Arab nations. Design/methodology/approach - The approach is modeled on Feldstein and Horioka covering the period 1963‐2007 for Saudi Arabia. We use the bounds testing approach and the Gregory and Hansen cointegration methods to test for the long‐run relationship between saving and investment. Additionally, before testing for this relationship, we conduct unit root tests, including the additive outlier model developed by Perron with an endogenously determined structural break. Findings - The study finds no evidence of a long‐run relationship between saving and investment and therefore concludes that capital is highly mobile in Saudi Arabia. This finding is plausible given the economic and financial reforms which have occurred in Saudi Arabia along with increased capital inflows into the country in the last few decades. Originality/value - Of the limited studies so far on developing countries, none has considered the capital mobility issue for an oil‐dependent country.

Keywords: Saving; Investment; Capital mobility; Saudi Arabia (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:sefpps:v:28:y:2011:i:2:p:136-148

DOI: 10.1108/10867371111137139

Access Statistics for this article

Studies in Economics and Finance is currently edited by Prof Niklas Wagner

More articles in Studies in Economics and Finance from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().