Title: Mechanical functioning of the Saudi economy in the context of the national transformation plan and its impacts on macroeconomic variables in Saudi Arabia

Authors: Abdessalem Gouider; Sahbi Gabsi

Addresses: Department of Economics, College of Economics and Administrative Sciences, Al-Imam University, P.O. Box 5701, Riyadh 11432, Saudi Arabia ' Department of Economics, College of Economics and Administrative Sciences, Al-Imam University, P.O. Box 5701, Riyadh 11432, Saudi Arabia

Abstract: The aim of this paper is to investigate the mechanical functioning of the Saudi economy in the context of the national transformation plan (NTP) and its impacts on most of the macroeconomic variables in Saudi Arabia. In line with the NTP, which is based mainly on promoting economic freedom, we apply the fully modified ordinary least square (FMOLS) approach to measure the impact of the economic freedom on non-oil GDP (proxy of economic growth) through the transmission channels including foreign direct investment (FDI), openness, government spending and unemployment from 1996 to 2015. The empirical results show that there is a significant positive relationship between economic growth and economic freedom in Saudi Arabia. However, the transmission channels' effects of the economic freedom index on the non-oil GDP in Saudi Arabia are slightly low. We suggest that policy-makers should implement more incentive measures to improve the Saudi economy rank within the economic freedom index.

Keywords: National Transformation Program; economic freedom; economic growth; unemployment; foreign direct investment; FDI; FMOLS approach; Saudi Arabia's Vision 2030.

DOI: 10.1504/IJEBR.2018.094381

International Journal of Economics and Business Research, 2018 Vol.16 No.3, pp.297 - 307

Received: 01 Aug 2017
Accepted: 26 Sep 2017
Published online: 31 Aug 2018 *

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