Financial Development And Economic Growth In Saudi Arabian Economy

Abstract

This study investigates the relationship between financial development and economic growth for Saudi Arabia for the period 1989-2008 by using fully modified ordinary least squares (FMOLS) approach.Financial market development hasbeen represented by the effect of credit market development (bank credits to the private sector) and stock market development (The general stock market index). The resultsindicate thatthe domestic bank credit to the private sector has significant and positive effect on economic growth in the long run, but insignificantand negative effect in the short run. On the other hand, stock market index has expected positive but insignificant effect in the long run but unexpected and insignificant effect in the short run.Finally,the growth of industrial production has expected positive and significant effecton economic growth either in the short or long run.

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