Monetary Policy, Income Inequality, and Sustainable Economic Growth in Saudi Arabia: An ARDL Analysis of the Moderating Role of Inequality Under Vision 2030

This study examines how income inequality conditions the effectiveness of monetary policy in delivering sustainable economic growth in Saudi Arabia over 1980–2024, a question of direct relevance to the Kingdom’s Vision 2030 agenda and to Sustainable Development Goals 8 and 10. We apply an Autoregressive Distributed Lag (ARDL) bounds-testing framework to four monetary policy instruments—the Saudi Central Bank (SAMA) repo rate, broad money supply (M2), domestic credit to the private sector, and the real effective exchange rate (REER)—with the Gini coefficient introduced as a moderator through mean-centered interaction terms. The bounds test confirms a robust long-run cointegrating relationship, and the error-correction term indicates rapid adjustment to equilibrium. In the long run, interest rates exert a significant negative effect on growth and on trade openness, a positive effect, while income inequality significantly moderates the growth effects of broad money supply and private-sector credit. Diagnostic tests support the adequacy of the specification. The findings indicate that financial inclusion is not only a distributional objective but a macroeconomic prerequisite for effective monetary policy transmission, with direct implications for integrating inclusive-finance policy into the Vision 2030 framework.