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Estimation and Analysis of the Output Gap for the Saudi Economy; Econometric Study (1970-2016)

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  • Mohamed A. M Sallam
  • Mohamed R Neffati

Abstract

This study highlights the important role plays by the output gap as guidance to the policymakers and macroeconomic decisions. There are two aims for this paper: firstly, it measures and estimates the output gap and secondly, it identifies and analyses the determinants of the economic output gap for the Saudi Arabian economy over the period 1970-2017. This paper uses the HP filter and the new form of production function methods to measure the output gap as the production function method gives more accurate results in calculating the output gap by basing the GDP gap on the sum of production factors gaps. The Autoregressive Distributed Lag (ARDL) cointegration approach and bounds test was applied to determine the factors responsible for this output gap and the Error Correction Model indicated the convergence towards long-run equilibrium. The findings showed the existence of a positive and negative cointegration relationship in the long run between the output gap and its estimated determinants whereby the public sector investment, import expenditure, and higher secondary enrollment have a positive relationship, while the money supply and export earnings have a negative relationship.

Suggested Citation

  • Mohamed A. M Sallam & Mohamed R Neffati, 2019. "Estimation and Analysis of the Output Gap for the Saudi Economy; Econometric Study (1970-2016)," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 9(2), pages 267-284.
    • Handle: RePEc:asi:aeafrj:v:9:y:2019:i:2:p:267-284:id:1801
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    Cited by:

    1. Éva Gyurkovics & Tibor Takács, 2023. "Estimation of the potential GDP by a new robust filter method," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 31(4), pages 1183-1207, December.
    2. Mohamed A.M. Sallam, 2021. "Determinants of Growth in Manufacturing Industries: Empirical Evidence from Egypt Using the ARDL Approach," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(3), pages 137-153.

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