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Bi-Demographic and Current Account Dynamics using SVAR Model: Evidence from Saudi Arabia

Hassan Ghassan (), Hassan R. Alhajhoj and Faruk Balli ()

MPRA Paper from University Library of Munich, Germany

Abstract: The study explores the impacts of the bi-demographic structure on the current account and gross domestic product (GDP) growth. Using structural vector autoregressive modeling (SVAR), we track the dynamic impacts on these underlying variables. New insights about the dynamic interrelation between bi-population age dependency rate, current account, and GDP growth have been developed. In the short and medium-term, the reactions of GDP growth to both shocks of native and immigrant working-age populations move unsteadily in opposite directions. However, in the long-run, both effects become moderately positive. Additionally, the positive long-run contribution of immigrant workers to the current account growth largely compensates for the negative contribution of the native population. We find a negative hump-shaped reaction of Saudi Age Dependency Rate to immigration policy shocks during a generation. When the shocks emanate from immigrants’ working age, there is a complex mechanism from the complementarity process to the substitutability process between immigrants and the Saudi workforce. In the short and medium-term, the immigrant workers are more complements than substitutes for native workers.

Keywords: Native population; Immigrant population; Current account; GDP Growth; Cointegration; SVAR (search for similar items in EconPapers)
JEL-codes: C51 F22 F41 J15 J23 (search for similar items in EconPapers)
Date: 2020-03, Revised 2021-06
New Economics Papers: this item is included in nep-ara, nep-isf and nep-opm
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Published in Economic Change and Restructuring https://doi.org/10.1007/s10644-021-09348-2 (2021): pp. 1-41

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Journal Article: Bi-demographic and current account dynamics using SVAR model: evidence from Saudi Arabia (2022) Downloads
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