Analytical Study of Factors Affecting Investment in Saudi Arabia from the Period of 1990- 2017

Abstract

This paper aims at estimating the effect of gross domestic product GDP and real effective exchange rate REER on investment. There is a long-run relationship between the model variables. Autoregressive distributed lag ARDL has been used for estimation covering the period 1970 – 2017. The results show that there is a long-term equilibrium relationship between the study variables and the effective real exchange rate. The one-unit increase in GDP increases the investment by 0.72 and the real effective single-unit exchange rate leads to an increase in GDP, Investment refers to the correction of the mistake that requires two years to reinvest the balance into equilibrium Since the exchange rate of the Saudi currency is pegged to the US dollar in the fixed term, The unit root tests reveal that all variable are integrated of order one and there one cointegrating equation relating them the Data have been transformed by natural logarithm to yield elasticities. Results gave the expected signs and all estimates are significan beside that economic policy makers in Saudi Arabia should pay attention to investing in the short and long term and create a good investment environment.