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Volume :47 Issue : 180 2021      Add To Cart                                                                    Download

Determinants of Demand for the International Reserves in Saudi Arabia Economy.

Auther : Dr. Mohammed S. Afifi

Objectives: The study attempted to analyze the demand function of the Saudi economy for international reserves during the period of (1980-2015).
Method: The study depended on a descriptive analysis of international reserves stocks and their related variables. The study also used the standard method of joint integration and error correction to reach the most important determinants that affected the function of demand for the international reserves in the KSA.
Results: The study found that the real gross domestic product GDP, importance of the external trade sector and the real interest rate in the American economy are all related to the Saudi economy demand for the international reserves in a moral positive correlation. On the other hand, the effective exchange rate in addition to foreign direct investment rate FDI of the GDP is related in a moral inverse relationship to these reserves in the long term. A short-term analysis by error correction approach met the long-term results except for effective real exchange rate lack of impact on the demands of these reserves.
Conclusion: Due to indexes concentration increase in the Saudi economy, the study called on the monetary authorities to necessarily make these reserves reach the internationally _recognized rates, through a functional separation between the methodology of forming and managing these international reserves and the methodology of forming and managing the sovereign wealth funds. The study also called on stimulating export-oriented domestic and foreign investment for its positive impact on reducing the holding cost of the international reserves in both short and long terms.

Keywords: Demand function, Saudi Arabia, international reserves.
 

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