MONETARY POLICY AND INFLATION CONTROL IN KINGDOM SAUDI ARABIA (KSA)

Abstract

The economy is fluctuating from time to time. Due to this, there have been a lot of times when the economy has been unstable and becomes weak when it has to fight with any financial turmoil. For this, the monetary policy helps to stabilize the financial market and keep the economy intact at least so that the country is prepared during the downturn by enhancing investment as well as employment opportunities. The aim of this research is to test the effect on monetary policy on inflation control in Saudi Arabia. This research uses quantitative methodology and test the impact by using ordinary least squares (OLS). Based on the coefficient, it is deduced that money supply is positively related and have significant impact on inflation and unemployment whereas gross domestic product (GDP) is negatively related and has no relationship with money supply. Nevertheless, in terms of correlation analysis, all the independent variables are moderately correlated to the dependent variable with correlation value of 0.560457, 0.605725 and 0.501308 for GDP, inflation and unemployment variable respectively.