Money, Income, and Prices in Saudi Arabia

Dr. Mohamed Abdel Rahman Salih

Volume 13 Issue 1

The paper examines the relationship between the three macroeconomic variables money, income, and prices in the Saudi Arabian economy. The methodology used is cointegration, bivariate and trivariate Vector Autoregressive (VAR) models, and Granger Causality/Block Exogeneity tests. We further supplement our results with impulse response and variance decomposition. The results for Saudi Arabia for the period 1968-2011 indicate two-way causation between income and money supply. The results also show that income Granger causes prices, and money Granger causes prices.