The Impact of exports and financial development on economic growth in Saudi Arabia: An Empirical Analysis (1980 -2018)

Abstract

The objective of the paper is to investigate the impact of exports and financial development on economic
growth in the short and long-run in Saudi Arabia using time series data from 1980 to 2018. The importance
of the research stems from the fact that the export of (goods, services and primary income), and financial
development(domestic credit to the private sector) have acted as an engine of growth by contributing to a
more efficient allocation of resources and by transmitting growth from one part of the world to another.
E-Views software is used to analyze the data. Autoregressive Distributed Lag (ARDL) cointegration
(bound cointegration technique) is applied to estimate the relationship between GDP and its explanatory
variables. The study reveals that an increase in the export and financial development will lead to
significant effects on the economic growth in the short and long run the validity of the equilibrium
relationship in the long run and signifies that the error correction mechanism is present in the model will
be adjusted in the first year by 0.44%. The Pairwise Granger causality test indicates a unidirectional
causality from export to economic growth, unidirectional causality from economic growth to financial
development and bilateral causality where both exports to the financial development can cause each other.
Indicates that results following the demand hypothesis, which holds the view that economic growth
triggers financial development.K