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Econometric Testing of the Displacement Effect: the Saudi Experience

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  • Ageli, Mohammed

Abstract

In this paper we have to explore the Displacement Effect in Saudi Arabia during the period (1970-2012) for real oil GDP and Non Oil GDP. We used a method as a time series econometrics techniques to examine how far the Displacement Effect validity can be applied in Saudi economy, by Using time series annual data for the periods during (1970 to 2012), (1970 to 1990) and (1991 to 2012). Three distinct time series techniques have been applied. The results obtained from the analyses find that the Peacock and Wiseman Version of Wagnerian proposition can explain the growth of government in Saudi Arabia, which holds for both the oil and non-oil income cases, and we have a structural break in the data. The findings also note that the existence of strong causality for Peacock and Wiseman Version of Wagner‟s law in the long run.

Suggested Citation

  • Ageli, Mohammed, 2013. "Econometric Testing of the Displacement Effect: the Saudi Experience," MPRA Paper 50565, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:50565
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    File URL: https://mpra.ub.uni-muenchen.de/50565/1/MPRA_paper_50565.pdf
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    References listed on IDEAS

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    1. Alan T. Peacock & Jack Wiseman, 1961. "The Growth of Public Expenditure in the United Kingdom," NBER Books, National Bureau of Economic Research, Inc, number peac61-1, February.
    2. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    3. Henrekson, Magnus, 1990. "The Peacock and Wiseman displacement effect : A reappraisal and a new test," European Journal of Political Economy, Elsevier, vol. 6(2), pages 245-260, October.
    4. Gabriella Legrenzi, 2004. "The Displacement Effect in the Growth of Governments," Public Choice, Springer, vol. 120(1_2), pages 191-204, July.
    5. Ólan T. Henry & Nilss Olekalns, 2002. "The Effect of Recessions on the Relationship between Output Variability and Growth," Southern Economic Journal, John Wiley & Sons, vol. 68(3), pages 683-692, January.
    6. Alan T. Peacock & Jack Wiseman, 1979. "Approaches To the Analysis of Government Expenditure Growth," Public Finance Review, , vol. 7(1), pages 3-23, January.
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    Cited by:

    1. Manuel Jaén-García, 2021. "Displacement Effect and Ratchet Effect: Testing of Two Alternative Hypotheses," SAGE Open, , vol. 11(1), pages 21582440211, March.

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    More about this item

    Keywords

    Displacement Effect; Co-integration; Error Correction Model; Augmented Dickey Fuller; Government Expenditure; Economic Growth; Saudi Arabia;
    All these keywords.

    JEL classification:

    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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