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The Impacts of Non-linear Oil Price Shocks on Saudi Savinginvestment Behavior: An Empirical Investigation

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  • Abdulaziz Hamad Algaeed

    (Department of Economics, Imam Mohamed Bin Saud Islamic University, Riyadh, Saudi Arabia)

Abstract

The purpose of this paper is to analyze theoretically and empirically the effects of a non-linear oil price shocks (OILshock) on Saudi investment-saving behavior for the period of 1985-2015, using structural vector autoregressive approach. The OILshock is calculated as SOPI, employing GARCH(1,1). Johansen's testing procedure result asserts the existence of stable long-run relationship between private saving investment (PI), OILshock, government expenditure (GOEX) and per-capita income (PERCAPITA). The findings confirm that the OILshock affect positively (+) PI. The sign is as expected and significant. Moreover, capital investment takes time to absorb the shock. Nonetheless, PERCAPITA as a proxy for aggregate demand had the right sign and statistically significant. GOEX had the positive sign reflecting the crowd-in effects. Although, Emmanuel et al. (2014), found negative impacts of OILshock on PI, our results should differ in sign because this analysis is forwarded towards an oil-exporting country.

Suggested Citation

  • Abdulaziz Hamad Algaeed, 2017. "The Impacts of Non-linear Oil Price Shocks on Saudi Savinginvestment Behavior: An Empirical Investigation," International Journal of Economics and Financial Issues, Econjournals, vol. 7(2), pages 155-165.
    • Handle: RePEc:eco:journ1:2017-02-21
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    References listed on IDEAS

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    1. Alom, Fardous, 2011. "Economic Effects of Oil and Food Price Shocks in Asia and Pacific Countries: An Application of SVAR Model," 2011 Conference, August 25-26, 2011, Nelson, New Zealand 115346, New Zealand Agricultural and Resource Economics Society.
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    3. Brigitte Desroches & Michael Francis, 2010. "World real interest rates: a global savings and investment perspective," Applied Economics, Taylor & Francis Journals, vol. 42(22), pages 2801-2816.
    4. Ekpeno L. Effiong, 2014. "Oil price shocks and Nigeria's stock market: what have we learned from crude oil market shocks?," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 38(1), pages 36-58, March.
    5. Brigitte Desroches & Michael Francis, 2006. "Global Savings, Investment, and World Real Interest Rates," Bank of Canada Review, Bank of Canada, vol. 2006(Winter), pages 3-17.
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    Cited by:

    1. Haider Mahmood & Ahmad M.A. Zamil, 2019. "Oil Price and Slumps Effects on Personal Consumption in Saudi Arabia," International Journal of Energy Economics and Policy, Econjournals, vol. 9(4), pages 12-15.
    2. Asunci n Arner G erre, 2017. "The Spanish used Oils Market: A Vector Error Correction Model," International Journal of Energy Economics and Policy, Econjournals, vol. 7(6), pages 1-10.
    3. Thomas Habanabakize, 2021. "Determining the Household Consumption Expenditure’s Resilience towards Petrol Price, Disposable Income and Exchange Rate Volatilities," Economies, MDPI, vol. 9(2), pages 1-15, June.

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    More about this item

    Keywords

    Investment; Saudi Arabia; A Nonlinear Oil Price Shocks; Structural Vector Autoregressive;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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