The Relationship Between Inflation and Economic Growth: A Further Evidence
Journal of World Economic Research
Volume 5, Issue 5, October 2016, Pages: 65-71
Received: Sep. 6, 2016; Accepted: Sep. 18, 2016; Published: Oct. 9, 2016
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Author
Abdulaziz Hamad Algaeed, Department of Economics, College of Economics and Administrative Sciences, Imam Mohamed bin Saud Islamic University, Riyadh, Saudi Arabia
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Abstract
This paper focuses on exploring the relationship between inflation and economic growth in Saudi Arabia. The real growth of non-oil measure is used as a dependent variable, whereas wholesale price is implemented as a proxy for inflation. This study covers the period of 1985-2015. The short and long-run relationships are estimated using co-integration techniques. The results support the existence of positive effects of inflation over economic growth. The threshold level of inflation for non-oil GDP is around a 10 percent. In addition, the long-run causality is running from inflation to real growth of non-oil GDP. The impulse responses test points out that future responsiveness of growth due to impulse of inflation is negative and significant after a year and a half. Whereas, the inflation responsiveness due to a shock in growth is effective positively after three years and a half in the future.
Keywords
Non-oil GDP, Saudi Arabia, Co-integration Analysis, Causality, Inflation
To cite this article
Abdulaziz Hamad Algaeed, The Relationship Between Inflation and Economic Growth: A Further Evidence, Journal of World Economic Research. Vol. 5, No. 5, 2016, pp. 65-71. doi: 10.11648/j.jwer.20160505.13
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Copyright © 2016 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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