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The Relationship between Saving and Investment: The Case of Saudi Arabia

Author

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  • Abdulelah Alrasheedy
  • Hamed Alaidarous

Abstract

It is an attempt to investigate the relationship between saving and investment and the mechanism of the way they influence the economic growth. It is very vital to study such causality to help policy makers setting out appropriate economic policies. It is taking us too long to come up with the results because of the lack of data, and the complexity of how saving and investment defined in case of Saudi economy. The results show that there is a bidirectional granger causality between private saving and private GDP, and unidirectional causality running from private saving to private investment. However, there is an ambiguous relationship missing between investment and economic growth at both aggregate and private levels. Finally, although this study shows the directional of causality between the three considered variables, the study could not catch up the magnitude of the impact of these variables on each other.

Suggested Citation

  • Abdulelah Alrasheedy & Hamed Alaidarous, 2019. "The Relationship between Saving and Investment: The Case of Saudi Arabia," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 11(11), pages 1-64, November.
    • Handle: RePEc:ibn:ijefaa:v:11:y:2019:i:11:p:64
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    References listed on IDEAS

    as
    1. De Vita, Glauco & Abbott, Andrew, 2002. "Are saving and investment cointegrated? An ARDL bounds testing approach," Economics Letters, Elsevier, vol. 77(2), pages 293-299, October.
    2. Terzi, Andrea, 1986. "Finance, Investment and Saving: A Comment," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 10(1), pages 77-80, March.
    3. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
    4. L.Randall Wray, 1991. "Saving, Profits, and Speculation in Capitalist Economies," Journal of Economic Issues, Taylor & Francis Journals, vol. 25(4), pages 951-975, December.
    5. L. Randall Wray, 1998. "Understanding Modern Money," Books, Edward Elgar Publishing, number 1668.
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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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