Budgetary institutions, fiscal policy, and economic growth : the case of Saudi Arabia

Abstract EN

This paper investigates budgetary and fiscal institutions in Saudi Arabia during the period 1969-2014.

In addition, the study examines the impact of government expenditure on non-oil private GDP per capita using Autoregressive Distributive Lag (ARDL) approach.

The study finds that although the Saudi government uses a conservative oil price when estimating oil revenues, government expenditure in general, and capital expenditure in specific, is still procyclical.

Also, the budget institutions index developed by Dabla-Norris et al (2010) shows that because of the limited power of the Saudi Consultative Assembly in the budgetary cycle, Saudi Arabia scored 0.42 out of 1 in the overall stage Index.

On the other hand, the estimation of the long run relationship between government expenditure and GDP per capita illustrates that lagged real government consumption expenditure has a positive and significant impact on real non-oil private GDP per capita while its contemporaneous effect is found to be negative