The nexus between remittance outflows and growth: A study of Saudi Arabia

Abstract

In this study, the autoregressive distributed lag (ARDL) and the error correction model (ECM) techniques were applied to empirically examine the relationship between economic growth and outflows of workers' remittances in Saudi Arabia from 1970 to 2010. The results show that there is a negative but statistically insignificant relationship between outflows of workers' remittances and economic growth in the long term. However, there is a negative and statistically significant relationship between workers' remittances and economic growth in the short term. To decrease workers' remittances, Saudi Arabia must find appropriate new channels to convince foreign workers to consume and invest their money in the country. The roles of government expenditures and exports in the economic growth of Saudi Arabia were also investigated. The amount of government expenditures and the value of exports were found to have positive and significant effects on economic growth in Saudi Arabia.