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2016•Munich Personal RePEc Archive (Ludwig Maximilian University of Munich)Open access

Testing Fiscal Sustainability under the Inter-Temporal Budget Constraint in Saudi Arabia

Haider Mahmood

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Abstract

This paper tests the fiscal sustainability for Saudi Arabia under the inter-temporal budget constraint for the variables public revenues and expenditures as ratio of GDP for a period 1980-2014. Both variables are found stationary at their first differences. Cointegration result proves the cointegrating relationships but the slope of public expenditures on public revenue is found less than one. Therefore, this study concludes a weak fiscal sustainability in Saudi Arabia and suggests the fiscal reforms to maintain a strong sustainability.

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This paper tests the fiscal sustainability for Saudi Arabia under the inter-temporal budget constraint for the variables public revenues and expenditures as ratio of GDP for a period 1980-2014. Both variables are found stationary at their first differences. Cointegration result proves the cointegrating relationships but the slope of public expenditures on public revenue is found less than one. Therefore, this study concludes a weak fiscal sustainability in Saudi Arabia and suggests the fiscal reforms to maintain a strong sustainability.

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Available abstract

This paper tests the fiscal sustainability for Saudi Arabia under the inter-temporal budget constraint for the variables public revenues and expenditures as ratio of GDP for a period 1980-2014. Both variables are found stationary at their first differences. Cointegration result proves the cointegrating relationships but the slope of public expenditures on public revenue is found less than one. Therefore, this study concludes a weak fiscal sustainability in Saudi Arabia and suggests the fiscal reforms to maintain a strong sustainability.

Key concepts: Cointegration, Fiscal sustainability, Sustainability, Revenue, Constraint (computer-aided design), Budget constraint, Economics, Macroeconomics

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