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Is Export-Led Growth Hypothesis Exist in Saudi Arabia? Evidence from an ARDL Bounds Testing Approach

Author

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  • Faisal FAISAL
  • Turgut TÜRSOY
  • Nil GÜNSEL REŞATOĞLU

Abstract

The study investigates the relationship between economic growth, imports and export for Saudi Arabia by using the time series data from 1968-2014. The study employs the recently developed ARDL-bounds testing approach. The estimations of the ARDL-bounds testing approach indicated that imports, export and GDP are strongly co-integrated. The finding of the study further indicated that exports have positive impact on the economic growth in the long run. This specifies that if exports are increased by one percent the economic growth is increased by 3.39%, implying the validity of export-led growth hypothesis. The parameter of error correction term is 2.89% that represents the speed of adjustment. This implies that economic growth converges to its long run equilibrium position by 2.89% speed of adjustments via channel of imports and Exports. As the speed of adjustment is very low and it would take time to return back to the equilibrium level, that confirms the stability of the system. The reliability and validity of the estimations results are confirmed by the diagnostics tests both in short and long run. Finally, the results of the granger causality suggest, a uni-directional causality running from export to GDP, suggesting the validity of export led growth hypothesis. While another uni-directional causality has been found from imports to exports. Being the member of OPEC, Saudi Arabia exports mainly comprises of oil that exposes the economy of country to external shocks. The study suggested that Saudi Arabia needs to invest more in the non-oil sector and diversify their investment by attracting more FDI. This will cause the economic growth to increase and also be more flexible to any external shocks.

Suggested Citation

  • Faisal FAISAL & Turgut TÜRSOY & Nil GÜNSEL REŞATOĞLU, 2017. "Is Export-Led Growth Hypothesis Exist in Saudi Arabia? Evidence from an ARDL Bounds Testing Approach," Asian Journal of Economic Modelling, Asian Economic and Social Society, vol. 5(1), pages 110-117.
    • Handle: RePEc:asi:ajemod:v:5:y:2017:i:1:p:110-117:id:891
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    Cited by:

    1. Muhamad, Suriyani & Che Sulaiman, Nor Fatimah & Saputra, Jumadil, 2018. "The Role of Human Capital and Innovation Capacity on Economic Growth in ASEAN-3," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 52(1), pages 257-268.
    2. Bakari, Sayef, 2021. "Reinvest the relationship between exports and economic growth in African countries: New insights from innovative econometric methods," MPRA Paper 108785, University Library of Munich, Germany.
    3. Fakhri J. Hasanov & Muhammad Javid & Frederick L. Joutz, 2022. "Saudi Non-Oil Exports before and after COVID-19: Historical Impacts of Determinants and Scenario Analysis," Sustainability, MDPI, vol. 14(4), pages 1-38, February.
    4. Bakari, Sayef, 2022. "The Impact of Natural resources, CO2 Emission, Energy use, Domestic Investment, Innovation, Trade and Digitalization on Economic growth: Evidence from 52 African Countries," MPRA Paper 114323, University Library of Munich, Germany.
    5. Sayef Bakari, 2017. "The Three-Way Linkages Between Export, Import And Economic Growth: New Evidence From Tunisia," Journal of Smart Economic Growth, , vol. 2(3), pages 13-53, December.
    6. Sasa OBRADOVIĆ & Nemanja LOJANICA, 2019. "Export-Led Growth: Evidence from Post-Communist Serbia," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 131-145, June.
    7. Bakari, Sayef, 2017. "Why is South Africa Still a Developing Country?," MPRA Paper 80763, University Library of Munich, Germany.
    8. Waheed, Rida & Sarwar, Suleman & Dignah, Ashwaq, 2020. "The role of non-oil exports, tourism and renewable energy to achieve sustainable economic growth: What we learn from the experience of Saudi Arabia," Structural Change and Economic Dynamics, Elsevier, vol. 55(C), pages 49-58.
    9. Sayef Bakari, 2017. "The Relationship between Export, Import, Domestic Investment and Economic Growth in Egypt: Empirical Analysis," EuroEconomica, Danubius University of Galati, issue 2(36), pages 34-43, November.
    10. Soonduck Yoo & Jong-Sun Park, 2019. "The Influence of Information Acceptance on Information Use Performance in the Case of Vulnerable Classes," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(5), pages 474-486, August.

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