Factors Affecting Inflation Rates in the Kingdom of Saudi Arabia: A standard study from 1980 to 2016

Abstract

This study aimed at identifying the factors affecting inflation rates in the Kingdom of Saudi Arabia for the period (1980-2016). To achieve the study purpose, the researcher adopted the descriptive analytical model as it suits this phenomenon. A group of variables that are expected to affect the inflation rate in the Saudi economy is selected. These variables are: money supply growth rate, imports of GDP, oil price growth rate, rate of exchange, income growth rate interest rate on the dollar and generate price level. Besides that, a standard model was built based on a series of data of inflation determents for the Saudi economy (1980-2016). The researcher also used the EViews program to tackle the relation among the variables and to obtain the best results. The study reached the following set of results: There is a direct relation between the inflation rate and money supply growth rate, imports of GDP, and general price level. Whereas the money supply growth rate has the strongest impact on inflation followed by imports of GDP, on the other hand, there is an inverse relation with both exchange rate. Meanwhile, the rest of the variables, oil price growth rate, income growth rate, and interest rate on the dollar have no effect on the inflation rate in Saudi Arabia.