IDEAS home Printed from https://ideas.repec.org/a/gam/jecomi/v13y2025i8p216-d1710274.html
   My bibliography  Save this article

The Relationship Between Trade Openness and the Inflation Rate in Saudi Arabia: A Cointegration Approach

Author

Listed:
  • Othman Altwijry

    (Department of Finance, College of Business and Economics, Qassim University, Buraidah 51452, Saudi Arabia)

  • Muhammad Tahir

    (Department of Economics, COMSATS University Islamabad, Abbottabad Campus, Abbottabad 22060, Pakistan)

Abstract

The relationship between trade openness and economic performance has been widely debated and researched during the last several decades. However, the specific influence of trade openness from the perspective of controlling the inflation rate is rarely researched specifically for the Kingdom of Saudi Arabia (KSA). Accordingly, this research paper attempts to test the influence of trade openness on inflation, focusing on KSA. The paper utilizes historical data from 1975 to 2023 and employs the “Autoregressive Distributed Lag (ARDL)” and “Nonlinear Autoregressive Distributed Lag (NARDL)” cointegration techniques to assess the responsiveness of the inflation rate to increased trade openness. The results of the ARDL demonstrated the positive influence that trade openness has on inflation, which is a rejection of Romer’s hypothesis. The findings of the NARDL also rejected Romer’s hypothesis by demonstrating a positive relationship between the positive shocks in trade openness and the inflation rate. Similarly, our results illustrated a significant negative impact of domestic industrialization and government expenditure on inflation. Moreover, we found that the inflation rate in KSA is significantly dependent on economic performance. Finally, our findings demonstrated that the natural resource sector is unable to explain the inflationary pressure in KSA significantly.

Suggested Citation

  • Othman Altwijry & Muhammad Tahir, 2025. "The Relationship Between Trade Openness and the Inflation Rate in Saudi Arabia: A Cointegration Approach," Economies, MDPI, vol. 13(8), pages 1-17, July.
    • Handle: RePEc:gam:jecomi:v:13:y:2025:i:8:p:216-:d:1710274
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2227-7099/13/8/216/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2227-7099/13/8/216/
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jecomi:v:13:y:2025:i:8:p:216-:d:1710274. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.