Government Spending Volatility and Real Economic Growth: Evidence From a Major Oil Producing Country, Saudi Arabia, 1970 to 2018

Abdulaziz H. Algaeed

SAGE Open, 2022, vol. 12, issue 2, 21582440221089948

Abstract: The objective of this paper is to examine the effect of government spending volatility on economic growth in an oil producing country—Saudi Arabia. The Hodrick–Prescott (HP) filtering approach was applied to decompose the data series into cyclical and trend components. The ordinary least squares, and nonlinear autoregressive distributed lag were also used, and the results confirm the negative effect of government spending volatility on real GDP growth in an oil-based economy. Moreover, the estimated coefficients of the nonlinear ARDL models indicate that changes in government spending have a significant short run and long run impact on real GDP growth, and real GDP growth responds asymmetrically to movements in government spending. Moreover, the more trade openness and credit fluctuate, the more volatile real economic growth is. Although the magnitude of government spending volatility is acceptable, the result proves that the exclusion of oil-based economies from the test of government spending volatility was inappropriate and unjustified. These results suggest that controlling the sources of instability in real GDP growth depends on the external sector and domestic credit. However, the successes of other countries should be presented and studied in order to choose appropriate policies that mitigate public spending volatility and contribute to sustainable economic growth.

Keywords: government expenditure; volatility; NARDL; OLS; HP; filtering (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://journals.sagepub.com/doi/10.1177/21582440221089948 (text/html)

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:sae:sagope:v:12:y:2022:i:2:p:21582440221089948

DOI: 10.1177/21582440221089948

Access Statistics for this article

More articles in SAGE Open
Bibliographic data for series maintained by SAGE Publications ().