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Exploring the Nexus Between Financial Deepening and Economic Performance: Evidence from Saudi Arabia

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  • Somaiyah Alalmai

Abstract

This study examines the impact of financial deepening on the rate of economic growth in Saudi Arabia using the autoregressive distributed lag (ARDL) co-integration approach. Unlike previous studies, this paper captures the effects of Vision 2030 reforms and provides updated empirical evidence on how financial deepening, government expenditure, and trade openness interact with economic growth. The sample includes time series data covering the period between 1989 to 2023. Our results reveal that financial deepening promotes Saudi Arabia growth, but only in the long run. Government expenditure has a significant impact on economic growth over time, with both positive and negative effects. Trade openness has significant and positive effects, underlining the relevance of global market integration in economic development. The long-term relationship is confirmed by the negative and highly significant error correction (ECT) term. It implies that any temporary deviation from equilibrium returns to normal in a short period, demonstrating a quick process for adjustment. These findings are valuable for policymakers navigating economic diversification in oil-dependent economies. Â JEL classification numbers: G20, G28, C32, O4.

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  • Somaiyah Alalmai, 2025. "Exploring the Nexus Between Financial Deepening and Economic Performance: Evidence from Saudi Arabia," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 15(3), pages 1-4.
    • Handle: RePEc:spt:apfiba:v:15:y:2025:i:3:f:15_3_4
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    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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