Reserves

Abstract

Several countries of the world surged to increase foreign reserves for precautionary and trade motives-specially after several economic and financial crises which faced international economy- although management of these reserves is very difficult , because of their direct effects on several macroeconomic goals ,the economic growth is the most important goal for countries of the world .Economists, views have varied in relation to effect of accumulated foreign reserve on economic growth because of several channels which transpose effect of accumulated foreign reserve to economic growth including exchange rate, investment, exports, inflation and credit .Some economists see that accumulated foreign reserve stimulate economic growth while others see that it is obstacle for economic growth, others show that this relationship is non significant. Thus ,the current research determine does accumulated) foreign reserve stimulate economic growth in the Kingdom of Saudi Arabia in the long run?, where applies studies are limited and conflicted in their results in relation to this problem .The researcher rely on macro dynamic model applied on the kingdom of Saudi Arabia for period 1978-2017, including different effect channels for reserve on economic growth and estimate it by autoregression and granger causality tests to determine the direction of causality between different variables .The results have confirmed that accumulated foreign reserve doesn’t stimulate economic growth ,thus it should be reconsideration in management of the foreign reserve.