Merchandise Import Demand Function in Saudi Arabia

Abstract

Merchandise imports in Saudi Arabia is growing steadily and very rapidly, at an average growth rate of 10.04 percent/year during 1975-2011. So, this study is very important to know the merchandise imports determinants in Saudi Arabian economy. This study empirically estimates the critical parameters of merchandise import demand determinants for Saudi Arabia by using Ordinary Least Squares (OLS) approach and Error Correction model during the period (1975-2011). The empirical results obtained show that, in both long run and short run, there are positive and significant relationships between the demand for merchandise import and real gross domestic product, gross capital formation expenditure, private consumption expenditure, government consumption expenditure and the relative price of imports to domestic price. On the other hand, there are positive but insignificant relationship between the demand for merchandise import and international reserves either in the long run or the short run.