Proceedings of 3rd Global Accounting, Finance and Economics Conference
5 - 7 May, 2013, Rydges Melbourne, Australia, ISBN: 978-1-922069-23-8
Inventory Investment and its Relation to the Sectoral
GDP in Saudi Arabia
Hamed Alhoshan and Abdullah Alshebel
The relationship between inventory investment and GDP has
been investigated and documented for various countries in the
world by many researchers. Most of the studies examined the
extent of the contribution of the inventory investment to the
volatility of the GDP growth. The method of analysis in this
regard ran fro a simple co-variance and correlation analysis to
the more sophisticated time series methods. In this paper,
however, we attempt a different them of analysis. That is we
intend to investigate the causal relationship and the
cointegration if possible between the inventory investment and
various types of Saudi Arabia GDP. Saudi Arabia is an oil
based economy, therefore its total GDP is in fact disaggregated
into three types of GDP; oil GDP, private GDP, and the
government GDP. The inventory investment, or the change in
inventory to be precise, is reported in an aggregated manner.
Therefore, the question is which of these types of the GDP is
more related to the inventory investment and what the direction
of the relationship is. Using annual data for the period 1968 to
2011, we tested the causal relationship by the mean of Granger
causality approach. Further, we tested both the short run and
the long run causality. Our primarily results indicates that for
the inventory and the government GDP, both types of causality
run from the former to the latter. While in the other two cases,
our findings suggest that there is long run causality runs from
the inventory to the privet GDP, and short run causality runs
from the inventory to the oil GDP.
_________________________________________________________
Hamed Alhoshan and Abdullah Alshebel, Department of Economics, King Saud University, Saudi
Arabia.