Influence of Inflation on the Economic Growth of Saudi Arabia

Abstract

Primary factors considered that influence inflation movement can experience significant changes due to the COVID-19 pandemic. This research focuses on examining macroeconomic factors which influence the inflation rate in Saudi Arabia which is critical for development and adjusting a suitable policy response. Saudi Arabia’s changing inflation trends are also affected by its internal and external factors including domestic demands, net spending of Government, and liquidity along with exchange rate movements and imported inflation. This research paper focuses on providing insights regarding previous studies conducted on this topic by adopting different approaches. The approach utilized in this study reflects mainly non-oil revenues like value-added tax along with levies related to expatriates on inflation. ARDL (Autoregressive Distribution Lag Model) has been applied instead of the Vector Error Correction model considering its robustness for 40 quarter sample sized integrated in this study. From the results, it has been confirmed that the inflation Movement in Saudi Arabia is more inclined to external factors than domestic factors.