Causality Relationship between Municipal Spending and Economic Growth in Saudi Arabia: An Econometric Approach

AbdulKarim K. Alhowaish

Article Details

Causality Relationship between Municipal Spending and Economic Growth in Saudi Arabia: An Econometric Approach

Authors:

AbdulKarim K. Alhowaish

Publisher:

Kuwait University

Journal:

Arab Journal of Administrative Sciences Vol.21 Issue 3, pp.429-449

Document Type:

Article

Publication Date:

1/2014

Document Language:

English

Document ID (Org No.):

2001943650

pISSN:

2957-3521

Keywords:

Abstract:

 This study aims to determine the relationship between municipal spending (MS) and economic growth (GDP) in Saudi Arabia during the period of 1981-2012. Using Vector Auto-Regression (VAR) and Vector Error Correction Model (VECM), the study revealed that there is a long-run cointegration relationship between the two variables under investigation. This relationship is a bi-directional causality relationship, suggested that a change in economic growth is positively causing change in municipal spending on the long-run, and vice versa. The results further indicated that a percentage growth in GDP induces approximately 0.12% growth in municipal spending and 1% growth in municipal spending induces approximately 0.04% growth in GDP, all things being equal. They also revealed that municipal sector adjusted is spending (i.e. speed of convergence to equilibrium) by 22.7% of the past deviation from equilibrium, which means that municipal spending needs approximately 4.5 corrective-years periods in order to return to the long-run equilibrium after any impact or shock in the system as a result of the change in national economic growth.

Article Details

Causality Relationship between Municipal Spending and Economic Growth in Saudi Arabia: An Econometric Approach

Authors:

AbdulKarim K. Alhowaish

Publisher:

Kuwait University

Journal:

Arab Journal of Administrative Sciences Vol.21 Issue 3, pp.429-449

Document Type:

Article

Publication Date:

1/2014

Document Language:

English

Document ID (Org No.):

2001943650

pISSN:

2957-3521

Municipal Spending

Economic Growth

VAR

VECM

Cointegration

Causality Approach

Kingdom of Saudi Arabia

Issues

Article Details

Authors: AbdulKarim K. Alhowaish

Publisher: Kuwait University

Journal: Arab Journal of Administrative Sciences Vol.21 Issue 3, pp.429-449

Document Type: Article

Publication Date: 1/2014

Document Language: English

Document ID (Org No.): 2001943650

pISSN: 2957-3521

Issues

Authors:

AbdulKarim K. Alhowaish

Publisher:

Kuwait University

Journal:

Arab Journal of Administrative Sciences Vol.21 Issue 3, pp.429-449

Document Type:

Article

Publication Date:

1/2014

Document Language:

English

Document ID (Org No.):

2001943650

pISSN:

2957-3521