Determinants of Economic Growth in GCC Economies

Abstract

The paper investigates determinants of economic growth in GCC countries using VECM approach. The results report that in a 10-year horizon, FDI accounts 15.87%, 10.29%, 16.58%, 0.89% and 6.88% for Bahrain, Kuwait, Qatar, Saudi Arabia and United Arab Emirates respectively in shocks in their economic growth compared to the contributions of exports (9.55%, 1.33%, 6.85%, 10.38% and 20.9%) and gross capital formation (0.83%, 0.07%, 9.88%, 1.98 and 17.98%) for the countries respectively. The results also show that the main determinants of economic growth are foreign direct investment and gross capital formation for Bahrain. For Kuwait, Qatar and Saudi Arabia, exports and gross capital formation are the main determinants of economic growth. Exports and foreign direct investment are the main determinants of economic growth in United Arab Emirates. Finally, there is no any evidence for short-run or long-run unidirectional or bidirectional causality relationship for Oman.