| Author(s) | Khalid H. A. Al-Qudair |
| Affiliation | Assistant Professor, Department of Economics, College of Administrative Sciences King Saud University, Riyadh, Saudi Arabia |
| Title | The Relationship between Real Government Consumption and Real Private Consumption in the Kingdom of Saudi Arabia |
| Source | Journal of King Saud University. Administrative Sciences. Volume 16, No 2. (2004/1424) |
| Abstract | This study examines the causal relationship between real private consumption and real government consumption in the Kingdom of Saudi Arabia using Granger causality techniques, Cointegration, and Error Correction Models in order to determine the long run equilibrium and the direction of the causal relationship, in both the long and the short runs. The Cointegration test indicates the existence of a long run equilibrium between real private consumption and real government consumption variables. The causality test indicates that there is a causal relationship which runs from real government consumption to real private consumption in the long but not the opposite. However, the causality test indicates that there is no short run causality. This result suggests that real government consumption has a positive effect on private consumption which is consistent with the Keynesians proposition. Therefore, government expenditure is considered an important policy instrument to affect the real variables in Saudi Arabia. |
