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The long-run relationship between savings and investment in oil-exporting developing countries: A case study of the Gulf Arab States

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  • Basher, Syed Abul
  • Fachin, Stefano

Abstract

The relationship between national saving and investment over the long term is examined for six Gulf Arab oil-exporting developing countries -- Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. We show that, provided some large outliers are properly accounted for, long-run equilibrium relationships between saving and investment (both total and fixed) exist in these countries. Since these countries have typically large current account surpluses such relationships cannot be explained by standard arguments. Our hypothesis is that the response of investment to saving largely depends on domestic absorptive capacity.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 29077.

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Date of creation: 17 Feb 2011
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Handle: RePEc:pra:mprapa:29077

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Keywords: Saving-investment correlation; oil-exporting developing countries; GCC countries; absorptive capacity; outlier detection; integrated process.;

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