Author(s): Elhachemi Abdelkader Hacine Gherbi
This paper investigates the long-run impact of share market development in terms of size and activity on gross fixed capital formation and trade in Saudi Arabia. It also demonstrated the existence of the causality hypothesis for the period from 1985 to 2018. The study uses Auto-Regressive Distributed Lag ARDL analysis to demonstrate that the long-run share market activity development proxies (value of shares traded and stock transaction) are insignificantly linked to the economic growth indicators (GFCF and trade). Meanwhile, the share market size development proxies (market value and number of shares traded) are positively and significantly linked to the economic growth indicators. It is thus imperative for Saudi policymakers to establish policies that improve the financial stock market, particularly in terms of market activity development. We recommend that the entire stock trading market be transformed to achieve superior exchange performance.