Abstract:ABSTRACT. This paper examines the role of money in the economy of Saudi Arabia using a vector autoregressive approach (VAR). Unit root tests show that logs of money supply (LM1), non-oil GDP (LNOY), and price level (LP) are difference stationary and cointegrated. Variance decompositions and impulse response functions reveal that there exists a bi-directional causation between money supply and nominal non-oil GDP and a unidirectional causation runs from LM1 to LP and from LNOY to LP. These findings suggest that… Show more
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