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Financial development and economic growth in an oil-rich economy: The case of Saudi Arabia

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  • Samargandi, Nahla
  • Fidrmuc, Jan
  • Ghosh, Sugata

Abstract

We investigate the effect of financial development on economic growth in the context of Saudi Arabia, an oil-rich economy. In doing so, we distinguish between the effects of financial development on the oil and non-oil sectors of the economy. Using the Autoregressive Distributed Lag (ARDL) Bounds test technique, we find that financial development has a positive impact on the growth of the non-oil sector. In contrast, its impact on the oil-sector growth and total GDP growth is either negative or insignificant. This suggests that the relationship between financial development and growth may be fundamentally different in resource-dominated economies.

Suggested Citation

  • Samargandi, Nahla & Fidrmuc, Jan & Ghosh, Sugata, 2014. "Financial development and economic growth in an oil-rich economy: The case of Saudi Arabia," Economic Modelling, Elsevier, vol. 43(C), pages 267-278.
  • Handle: RePEc:eee:ecmode:v:43:y:2014:i:c:p:267-278
    DOI: 10.1016/j.econmod.2014.07.042
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