IMPACT OF FISCAL DEFICIT IN SAUDI ARABIA

Abstract

Fiscal deficit is a very important aspect to be studied in finance and economics. The impact of fiscal deficit on economic growth remains one of the highly debated issues across all economies worldwide. This study is interested in determining the impact of fiscal deficit on government expend, Gross Domestic Product (GDP), the inflation, and unemployment. The methods applied in the investigation, mainly include the Granger Causality test, simultaneous equations model, Vector Auto Regression (VAR), Ordinary Least Squares, and Error Correction Models (ECM). Notwithstanding, empirical literatures available indicated that the method of financing as well as the government spending components have different economic effects. Findings from this study showed that fiscal deficit has a strong positive impact of the government expand nation as a percentage of the GDP. Similar to other cases of emerging market economies, the fiscal policies are dominant in the simulation of the private sector development. The research also revealed that there exist a strong negative impact between the fiscal deficit and inflation