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The Short- and Long-Term Effects of Financial Sector Development on Economic Growth in Saudi Arabia: An ARDL Model Analysis

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  • Abdulaziz Adel Abdulaziz Aldaarmi

Abstract

The goal of this research was to explore Financial Development and Economic Growth in Saudi Arabia. This would provide evidence pertaining to the relationship between financial sector development and economic growth within the country’s context. In regard to methodology, this study purposed an Autoregressive Distributed Lag (ARDL) model and an ECM model to underline the short and long-term dynamics. To measure financial development, this study implemented the value of credits provided by the financial sector to the private sector divided by GDP. Furthermore, based on a comprehensive and holistic reading of the literature, this study also implemented the control variables of trade openness, gross fixed capital formation, and the labor force. The findings show that there are long- and short-term relationships between financial development and economic growth. The regression coefficients for the ARDL model and Unrestricted Error Correction Model (ECM) were found to be statistically significant at the 10% level. All control variables were found to influence the relationship between the independent and dependent variables.

Suggested Citation

  • Abdulaziz Adel Abdulaziz Aldaarmi, 2021. "The Short- and Long-Term Effects of Financial Sector Development on Economic Growth in Saudi Arabia: An ARDL Model Analysis," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 13(9), pages 1-25, August.
    • Handle: RePEc:ibn:ijefaa:v:13:y:2021:i:9:p:25
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    References listed on IDEAS

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    1. Samargandi, Nahla & Fidrmuc, Jan & Ghosh, Sugata, 2014. "Financial development and economic growth in an oil-rich economy: The case of Saudi Arabia," Economic Modelling, Elsevier, vol. 43(C), pages 267-278.
    2. Jagadish Prasad Bist, 2018. "Financial development and economic growth: Evidence from a panel of 16 African and non-African low-income countries," Cogent Economics & Finance, Taylor & Francis Journals, vol. 6(1), pages 1449780-144, January.
    3. Christopoulos, Dimitris K. & Tsionas, Efthymios G., 2004. "Financial development and economic growth: evidence from panel unit root and cointegration tests," Journal of Development Economics, Elsevier, vol. 73(1), pages 55-74, February.
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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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