The long-run relationship between savings and investment in oil-exporting developing countries: A case study of the Gulf Arab States

Basher, Syed Abul and Fachin, Stefano (2011): The long-run relationship between savings and investment in oil-exporting developing countries: A case study of the Gulf Arab States.

Abstract

The relationship between national saving and investment over the long term is examined for six Gulf Arab oil-exporting developing countries -- Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. We show that, provided some large outliers are properly accounted for, long-run equilibrium relationships between saving and investment (both total and fixed) exist in these countries. Since these countries have typically large current account surpluses such relationships cannot be explained by standard arguments. Our hypothesis is that the response of investment to saving largely depends on domestic absorptive capacity.

• Item Type: MPRA Paper
• Language: English
• Keywords: Saving-investment correlation; oil-exporting developing countries; GCC countries; absorptive capacity; outlier detection; integrated process.
• Subjects: H - Public Economics > H5 - National Government Expenditures and Related Policies > H54 - Infrastructures ; Other Public Investment and Capital Stock; C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E22 - Investment ; Capital ; Intangible Capital ; Capacity; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O16 - Financial Markets ; Saving and Capital Investment ; Corporate Finance and Governance; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E21 - Consumption ; Saving ; Wealth

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