Significance of International Trade and National GDP as Two Integral Components of Sustainable Economic Development in Saudi Arabia

Abstract

Abstract: Being one of the principal drivers of economic growth, both exports and imports have significant effects on wealth generation, gross domestic product, and economic development. The present research focuses on examining exports, imports, and gross domestic product in Saudi Arabia to determine the possibility of a causal relationship between these economic variables. To this end, the study relies on datasets encompassing forty-seven years of records published by the World Bank and the World Development Indicators Database. The results of data analysis were obtained by conducting the cointegration and Granger causality tests. Based on the consequent empirical data analysis, the study indicates that Saudi’s GDP is cointegrated with imports and export when assessed from the long-term perspective. The results of Granger causality further demonstrated unidirectional causality for GDP and imports. When considered in isolation from other factors, the results suggest that trade is a significant contributor to the Saudi economy, with transnational trade having direct benefits for economic development at the expense of environmental quality. In this context, trade liberalization emerges as a powerful tool for boosting economic growth that can also negatively affect sustainability by introducing and stimulating environmentally detrimental practices. Highlights: -The extent of international trade relies on the contribution of imports and exports to economic growth that differs from country to country. -The openness to a country’s trade is captured through different measures for determining the level to which a country is linked with other countries. -According to the study results, GDP, export, and import are nonstationary. -It reveals that exports and economic growth are directly proportional to each other. -The findings of the study revealed that exports had a longer impact on the GDP.