The Relationship between Saving and Investment: The Case of Saudi Arabia

Abstract

It is an attempt to investigate the relationship between saving and investment and the mechanism of the way they influence the economic growth. It is very vital to study such causality to help policy makers setting out appropriate economic policies. It is taking us too long to come up with the results because of the lack of data, and the complexity of how saving and investment defined in case of Saudi economy. The results show that there is a bidirectional granger causality between private saving and private GDP, and unidirectional causality running from private saving to private investment. However, there is an ambiguous relationship missing between investment and economic growth at both aggregate and private levels. Finally, although this study shows the directional of causality between the three considered variables, the study could not catch up the magnitude of the impact of these variables on each other.