Relevance of oil price, military expenditure and exports to achieve the Saudi Arabian sustainable economic and environmental objectives: a non-linear ARDL approach.

Abstract

This study investigates the economic and environmental issues of Saudi Arabia, a net exporter of crude oil mainly relying on oil exports, which faces economic crises due to the decline in oil prices. For this purpose, we highlighted the main challenges of the Saudi economy, such as oil price shocks and a significant increase in military expenditures. The economic and environmental issues are vital for the country's development and sustainability. Saudi Arabia is a major exporter of fossil fuels, which threatens its long-term economic growth due to the global transition towards renewables. Also, heavy dependence on fossil fuels is deteriorating the environment as well. On account of this, we extended the Solow growth model by augmenting oil prices, military expenditure, and exports. Similarly, the autoregressive distributed lag (ARDL) bound testing approach is used to find the long-term as well as the short-term nexus between variables. The study provides innovative findings regarding the country's role in oil price fluctuations, exports, and heavy military expenditures. In the short run, higher oil prices are increasing the economic process. In the long run, higher oil prices have a significant and negative impact. Military expenditure and exports have a significant and positive relationship with economic growth in the case of long-run analysis. For carbon emissions, the rise in oil prices helps reduce carbon emissions. In comparison, higher exports are also responsible for carbon emissions. The study proposes innovative and fruitful policies regarding the economic prosperity of Saudi Arabia, such as increasing the military expenditure to maintain peace in the region and increasing the exports of oil products, as well as non-oil products, to have shelter from oil price shocks.