Author(s): Mohammed Ziaur Rehman
This research paper investigates the linkage between financial development and economic growth in Saudi Arabia from 1985 to 2016 by employing Vector Auto Regression (VAR). The financial development encompasses the banking sector development and the stock market development. Johansen co-integration test demonstrates that there is no long run co-integration among the selected variables. Results of VAR reports that there are few significant values of coefficients among the purported variables. The Granger causality test states that the economic growth measured by real GDP per capita and BSD measured by the ratio of Broad Money to GDP (M2 to GDP) exhibit bi-directional linkage. The SMD measured by the ratio of the stock market capitalization to GDP causes the BSD. Pertinent authorities in the Kingdom should buttress considerable set of financial reforms in sync with the global stipulations in order to drive forward the economic growth.