Financial Depth and Efficiency, and Economic Growth Nexus in Saudi Arabia and Oman

Abstract

This paper aims to examine the financial depth and efficiency and economic growth nexus in the context of Saudi Arabia and Oman. In particular, this paper addresses on how financial depth and efficiency relate to economic growth and the causal relation between financial depth and efficiency and the economic growth in Saudi Arabia and Oman. Methodological wise, this study employs a panel data of Saudi Arabia and Oman over the period of 1990 - 2015 and uses the determination of line of best to analyze the causal relations. The empirical results show that financial deepening have desirable effects on the economic growth in Oman, while increasing financial depth and efficiency has detrimental impact to economic growth of Saudi Arabia. Based on these empirical facts, we conclude that the financial deepening in Saudi Arabia is not an economic prioritized strategy, but financial deepening is an economic prioritized strategy in Oman. Two main policy implications are reached.