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On the Causal Relationship between Household Consumption and Economic Growth in Saudi Arabia

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  • Moayad Al Rasasi
  • Yasir Alzahrani
  • Mohammed Alassaf

Abstract

This research paper explores the causal relationship between household consumption and economic growth over the period of 1980-2017. Hence, it applies the popular cointegration tests alongside the most common causality test. The empirical analysis shows the presence of a positive long run relationship between household consumption and economic growth. In specific, we find evidence revealing that a one percent increase in household expenditures on consumption would boost economic growth by 0.7 percent. Furthermore, causality analysis, based on Granger (1969) test, suggests that variation in household consumptions could explain changes in economic growth.

Suggested Citation

  • Moayad Al Rasasi & Yasir Alzahrani & Mohammed Alassaf, 2021. "On the Causal Relationship between Household Consumption and Economic Growth in Saudi Arabia," Business and Economic Research, Macrothink Institute, vol. 11(2), pages 165-177, June.
    • Handle: RePEc:mth:ber888:v:11:y:2021:i:2:p:165-177
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    References listed on IDEAS

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    1. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, vol. 64(4), pages 813-836, July.
    2. Al-Iriani, Mahmoud A., 2006. "Energy-GDP relationship revisited: An example from GCC countries using panel causality," Energy Policy, Elsevier, vol. 34(17), pages 3342-3350, November.
    3. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
    4. Alkhathlan, Khalid & Javid, Muhammad, 2013. "Energy consumption, carbon emissions and economic growth in Saudi Arabia: An aggregate and disaggregate analysis," Energy Policy, Elsevier, vol. 62(C), pages 1525-1532.
    5. Schwert, G. William, 1987. "Effects of model specification on tests for unit roots in macroeconomic data," Journal of Monetary Economics, Elsevier, vol. 20(1), pages 73-103, July.
    6. Alshehry, Atef Saad & Belloumi, Mounir, 2015. "Energy consumption, carbon dioxide emissions and economic growth: The case of Saudi Arabia," Renewable and Sustainable Energy Reviews, Elsevier, vol. 41(C), pages 237-247.
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    Cited by:

    1. Botchuin, Wilfred Catin, 2023. "Inclusive Growth Analysis: Evidence from Côte d’Ivoire," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 76(1), pages 91-134.

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    More about this item

    Keywords

    consumption; economic growth; causality; cointegration;
    All these keywords.

    JEL classification:

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

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