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Financial Deepening and Economic Growth in Saudi Arabia

Author

Listed:
  • Hazem A. Marashdeh

    (Hazem A. Marashdeh, Associate Professor, Faculty of Business, ALHOSN University, Abu Dhabi 38772, United Arab Emirates. E-Mail: h.marashdeh@alhosnu.ae)

  • Husam-Aldin N. Al-Malkawi

    (Husam-Aldin N. Al-Malkawi, Associate Professor, Faculty of Economics and Administration, King Abdulaziz University, Jeddah 80201, Saudi Arabia. E-mail: h.almalkawi@gmail.com)

Abstract

This article draws on the authors’ previously published work. It aims to examine the relationship between financial deepening and economic growth in one of the major emerging economies, namely Saudi Arabia. Using time series data from 1970 to 2010, the study employs the autoregressive distributed lag approach to co-integration. The financial depth or size of the financial intermediaries’ sector is measured by the monetisation ratio (M2/GDP). On the one hand, the results show a positive and statistically significant long-run relationship between financial deepening, as measured by M2/GDP, and economic growth, as measured by gross domestic product (GDP) per capita growth. On the other hand, there is no evidence of the short-run dynamic bidirectional relationship between the variables. By and large, the result supports the supply-leading hypothesis that financial deepening spurs economic growth in the case of Saudi Arabia. JEL Classification: G20, O40, C22

Suggested Citation

  • Hazem A. Marashdeh & Husam-Aldin N. Al-Malkawi, 2014. "Financial Deepening and Economic Growth in Saudi Arabia," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 13(2), pages 139-154, August.
    • Handle: RePEc:sae:emffin:v:13:y:2014:i:2:p:139-154
    DOI: 10.1177/0972652714541339
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    References listed on IDEAS

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    More about this item

    Keywords

    Financial deepening; economic growth; Saudi Arabia; ARDL;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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