Abstract

Within the last decade, the Kingdom of Saudi Arabia (KSA) achieved a high economic rate of growth of about 5.5% per year. Consequently, the number of immigrants grew rapidly reaching 9 million, which resulted in an increase in worker remittances out of the Kingdom. Since then, the KSA has become one of the first countries of the world in terms of remittances outflows and coming third worldwide after the USA and Russia in 2014 as remittances totaled 37 billion dollars, about 5% of the gross domestic product (GDP) and have doubled within 6 years.  This research tries to measure the effects of these remittances on the economic growth of Saudi Arabia during the period 1970 to 2014 by using standard growth model augmented by the amount of remittances outflows. The Autoregressive Distributed Lag approach to Error correction modeling (ARDL-ECM) was used in order to estimate a short and long relation between remittances and gross domestic product (GDP) in Saudi Arabia in the studied period. The main result is that, both in the long and the short term, remittances outflows have no significant effect on GDP. This could be attributed to their decreasing share relative to GDP.

Key words: Economic growth, workers' remittances, ARDL model.