The impacts of International Financial Crisis on Saudi Arabia Economy: Evidence from Asymmetric SVAR modelling
DOI:
https://doi.org/10.6000/1929-7092.2013.02.27Keywords:
Financial Crisis, International Liquidity, Asymmetric SVAR Model, Saudi ArabiaAbstract
This paper aims to measure the impacts of International Financial Crisis on the performance of the Saudi Arabian economy from 1968 to 2010. Linear and non-linear SVAR methodologies are used to exhibit the interdependence between the process of international liquidity, net-exports and economic growth. The empirical models show that the impacts of international financial crisis lead to an immediate drop in the net-exports and conduct to reduce gradually real economic growth during roughly three years. In the horizon, the variation in economic growth is largely attributed to domestic supply shocks, but negative shocks of international financial markets drove to reduce the economic growth in the long-run by 1.04%References
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Bracke T. and M. Fidora. 2008. “Global Liquidity Glut or Global Savings Glut?” Working Paper Series, European Central Bank 911. http://www.ecb.europa.eu
Breitung J., R. Brüggemann and H. Lütkepohl. 2004. “Structural Vector Autoregressive modeling.” Chapter 4 in H. Lutkepohl and M. Kratzig (Eds.), Applied Time Series Econometrics. Cambridge University Press.
http://dx.doi.org/10.1017/CBO9780511606885.005
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http://dx.doi.org/10.1002/jae.837
Calvo G. 1998. “Capital Flows and Capital-Market Crises: The Simple Economics of Sudden Stops.” Journal of Applied Economics I(1):35-54.
Chamley C.P. 2002. “Rational Herds: Economic Models of Social Learning.” Cambridge University Press: Cambridge.
Clarida R.H. 2005. “Japan, China, and the U.S. Current Account Deficit.” CATO Journal 25:111–114.
Colander D., H. Follmer, A. Haas, M. Goldberg, K. Juselius, A. Kirman, Th. Lux and B. Sloth. 2009. “The financial crisis and the systemic failure of academic economics.” Kiel Working Papers No. 1489. http://www.ifw-members.ifw-kiel.de/publications/
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Granger CWJ. and TH. Lee. 1989. “Investigation of production sales and inventory relationship using multi-cointegration and non symmetric error correction models.” Journal of Applied Econometrics 4:145-159.
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Juselius K. 2006. “The cointegrated VAR model: Methodology and Applications.” Oxford University Press: Oxford.
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Mackowiak B. 2007. “External shocks, US monetary policy and macroeconomic fluctuations in emerging markets.” Journal of Monetary Economics 54:2512-2520.
http://dx.doi.org/10.1016/j.jmoneco.2007.06.021
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http://dx.doi.org/10.1016/j.econmod.2006.08.005
Michaud FL. and C. Upper. 2008. “What Drives Interest Rates? Evidence from the Libor Panel.” Bank for International Settlements Quarterly Review (March):47–58.
Morrison WM. and M. Labonte. 2008. “China's holdings of US securities: implications for the US economy.” CRS Report for Congress. Order Code RL34314. Congressional Research Service.
Nielson HB. 2004. “Cointegration analysis in the presence of outliers.” Econometrics Journal 7:249-271.
http://dx.doi.org/10.1111/j.1368-423X.2004.00130.x
Nowak S., JR. Andritzky, A. Jobst, and NT. Tamirisa. 2009. “Macroeconomic Fundamentals, Price Discovery and Volatility Dynamics in Emerging Markets.” International Monetary Fund Working Paper No 09/147.
Portes R. 2009. “Global imbalances.” In M Dewatripont, X Freixas, and R Portes (eds.), Macroeconomic stability and financial regulation: Key issues for the G20, Centre for Economic Policy Research.
Reinhart CM. and K. Rogoff. 2008. “This Time is Different: Eight Centuries of Financial Folly.” Princeton: Princeton University Press.
http://dx.doi.org/10.3386/w13882
Roubini N. and B. Setser. 2005. “Will the Bretton Woods 2 Regime Unravel Soon? The Risk of a Hard Landing in 2005–2006.” Federal Reserve Bank of San Francisco Proceedings, February.
Sester B. and R. Ziemba. 2007. “Understanding the new Financial Superpower: the Management of GCC Official Reserves Assets.” Roubini Global Economics (RGE) Monitor.
Stiglitz J. 2000. “Capital Market Liberalization, Economic Growth and Instability.” World Development 28(6):1075-1086.
http://dx.doi.org/10.1016/S0305-750X(00)00006-1
Wang P. 2010. “The Economics of Foreign Exchange and Global Finance.” ISBN: 978-3-642-11136-5, Springer.
Woertz E. 2008. “Impact of the US Financial Crisis on GCC Countries.” Gulf Research Center GRC, October Report, Dubai
http://dx.doi.org/10.1016/j.jfs.2005.10.001
Amisano G. and C. Giannini. 1997. “Topics in Structural VAR Econometrics.” 2d Edition, Springer-Verlag, Berlin.
http://dx.doi.org/10.1007/978-3-642-60623-6
Aoki M. and H. Yoshikawa. 2007. “Reconstructing Macroeconomics: A Perspective from Statistical Physics and Combinatorial Stochastic Processes.” Cambridge University Press.
Belke A., W. Orth and R. Setzer. 2010. “Liquidity and the dynamic pattern of asset price adjustment: A global view.” Journal of Banking & Finance 34(8):1933-1945.
http://dx.doi.org/10.1016/j.jbankfin.2009.12.012
Blanchard O. 2009. “The Perfect Storm.” Finance and Development, June:37-39.
Bordo MD., CM. Meissner and D. Stuckler. 2010. “Foreign currency debt, financial crises and economic growth: A long-run view.” Journal of International Money and Finance 29(4):642-665.
http://dx.doi.org/10.1016/j.jimonfin.2010.01.002
Borio C. 2006. “Monetary and financial stability: here to stay?” Journal of Banking & Finance 30(12):3407-3414.
http://dx.doi.org/10.1016/j.jbankfin.2006.06.004
Bourland B. 2008. “Saudi Arabia and the global financial crisis.” Monthly Bulletin of Jadwa Investment December:1-15. http://www.jadwa.com/en/researchsection/research/
Bracke T. and M. Fidora. 2008. “Global Liquidity Glut or Global Savings Glut?” Working Paper Series, European Central Bank 911. http://www.ecb.europa.eu
Breitung J., R. Brüggemann and H. Lütkepohl. 2004. “Structural Vector Autoregressive modeling.” Chapter 4 in H. Lutkepohl and M. Kratzig (Eds.), Applied Time Series Econometrics. Cambridge University Press.
http://dx.doi.org/10.1017/CBO9780511606885.005
Canova F. 2005. “The transmission of US shocks to Latin America.” Journal of Applied Econometrics 20:229-251.
http://dx.doi.org/10.1002/jae.837
Calvo G. 1998. “Capital Flows and Capital-Market Crises: The Simple Economics of Sudden Stops.” Journal of Applied Economics I(1):35-54.
Chamley C.P. 2002. “Rational Herds: Economic Models of Social Learning.” Cambridge University Press: Cambridge.
Clarida R.H. 2005. “Japan, China, and the U.S. Current Account Deficit.” CATO Journal 25:111–114.
Colander D., H. Follmer, A. Haas, M. Goldberg, K. Juselius, A. Kirman, Th. Lux and B. Sloth. 2009. “The financial crisis and the systemic failure of academic economics.” Kiel Working Papers No. 1489. http://www.ifw-members.ifw-kiel.de/publications/
Dell' Ariccia G., E. Detragiache and R. Rajan. 2008. “The Real Effects of Banking Crises.” Journal of Financial Intermediation 17:89–112.
http://dx.doi.org/10.1016/j.jfi.2007.06.001
Demirguc-Kunt A., and R. Levine. 2008. “Finance, financial sector policies and long-run growth.” Commission on growth and development, Working Paper No. 11, World Bank. http://wwwwds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2008/01/07/000158349_20080107115116/Rendered/PDF/wps4469.pdf
Edwards S. 2006. “Monetary unions, external shocks and economic performance: A Latin American perspective.” International Economics and Economic Policy 3:225-247.
http://dx.doi.org/10.1007/s10368-006-0056-2
Enders W. 2004. “Applied econometric time series.” New York: John Wiley & Sons.
Engle RF. and CWJ. Granger (Eds.). 1991. “Long Run Economic Relations: Readings in Cointegration.” Oxford University Press, Oxford.
Galindo A., F. Schiantarelli and A. Weiss. 2007. “Does Financial Liberalization Improve the Allocation of Investment? Micro-evidence from Developing Countries.” Journal of Development Economics 83(2):562–587.
http://dx.doi.org/10.1016/j.jdeveco.2005.09.008
Goodhart C. 2006. “A Framework for Assessing Financial Stability?” Journal of Banking and Finance 30(12):3415-3422.
http://dx.doi.org/10.1016/j.jbankfin.2006.06.003
Gomez V., and A. Maravall. 1996. “Programs TRAMO and SEATS, Instruction for User (Beta Version).” Bank of Spain. Working Papers 9628.
Granger CWJ. and TH. Lee. 1989. “Investigation of production sales and inventory relationship using multi-cointegration and non symmetric error correction models.” Journal of Applied Econometrics 4:145-159.
http://dx.doi.org/10.1002/jae.3950040508
IMF. 2008. “Spillovers to Emerging Equity Markets.” Global Financial Stability Report, October:131-151.
IMF. 2009. “Balance of Payments and International Investment Position Manual.” Sixth edition. Washington DC.
Johansen S. and K. Juselius. 1990. “Maximum Likelihood Estimation and Inference on Cointegration – with Applications to the Demand for Money.” Oxford Bulletin of Economics and Statistics 52:169-210.
http://dx.doi.org/10.1111/j.1468-0084.1990.mp52002003.x
Juselius K. 2006. “The cointegrated VAR model: Methodology and Applications.” Oxford University Press: Oxford.
Kashyap A., Rajan R., and J. Stein. 2008. “The Global Roots of the Current Financial Crisis and its Implications for Regulation.” Paper Presented at the Bank of Finland, Helsinki.
Kenc T. and S. Dibooglu. 2010. “The 2007–2009 Financial Crisis, Global Imbalances and Capital Flows: Implications for Reform.” Economic Systems 34:3–21.
http://dx.doi.org/10.1016/j.ecosys.2009.11.003
Mackowiak B. 2007. “External shocks, US monetary policy and macroeconomic fluctuations in emerging markets.” Journal of Monetary Economics 54:2512-2520.
http://dx.doi.org/10.1016/j.jmoneco.2007.06.021
Mehrara M. and KN. Oskoui. 2007. “The sources of macroeconomic fluctuations in oil exporting countries: A comparative study.” Economic Modelling 24(3):365-379.
http://dx.doi.org/10.1016/j.econmod.2006.08.005
Michaud FL. and C. Upper. 2008. “What Drives Interest Rates? Evidence from the Libor Panel.” Bank for International Settlements Quarterly Review (March):47–58.
Morrison WM. and M. Labonte. 2008. “China's holdings of US securities: implications for the US economy.” CRS Report for Congress. Order Code RL34314. Congressional Research Service.
Nielson HB. 2004. “Cointegration analysis in the presence of outliers.” Econometrics Journal 7:249-271.
http://dx.doi.org/10.1111/j.1368-423X.2004.00130.x
Nowak S., JR. Andritzky, A. Jobst, and NT. Tamirisa. 2009. “Macroeconomic Fundamentals, Price Discovery and Volatility Dynamics in Emerging Markets.” International Monetary Fund Working Paper No 09/147.
Portes R. 2009. “Global imbalances.” In M Dewatripont, X Freixas, and R Portes (eds.), Macroeconomic stability and financial regulation: Key issues for the G20, Centre for Economic Policy Research.
Reinhart CM. and K. Rogoff. 2008. “This Time is Different: Eight Centuries of Financial Folly.” Princeton: Princeton University Press.
http://dx.doi.org/10.3386/w13882
Roubini N. and B. Setser. 2005. “Will the Bretton Woods 2 Regime Unravel Soon? The Risk of a Hard Landing in 2005–2006.” Federal Reserve Bank of San Francisco Proceedings, February.
Sester B. and R. Ziemba. 2007. “Understanding the new Financial Superpower: the Management of GCC Official Reserves Assets.” Roubini Global Economics (RGE) Monitor.
Stiglitz J. 2000. “Capital Market Liberalization, Economic Growth and Instability.” World Development 28(6):1075-1086.
http://dx.doi.org/10.1016/S0305-750X(00)00006-1
Wang P. 2010. “The Economics of Foreign Exchange and Global Finance.” ISBN: 978-3-642-11136-5, Springer.
Woertz E. 2008. “Impact of the US Financial Crisis on GCC Countries.” Gulf Research Center GRC, October Report, Dubai
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Published
2013-11-13
How to Cite
Ghassan, H. B., Alhajhoj, H. R., & Alaoui, M. K. (2013). The impacts of International Financial Crisis on Saudi Arabia Economy: Evidence from Asymmetric SVAR modelling. Journal of Reviews on Global Economics, 2, 390–406. https://doi.org/10.6000/1929-7092.2013.02.27
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