Saudi Cultural Missions Theses & Dissertations
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Item Restricted The Relationship between Financial Development and Economic Growth in Saudi Arabia: A comparative Analysis before and after Vision 2030 (2000-2023)(Saudi Digital Library, 2025) Alqarn, Kawthar Ali H; DAMJANOVIC, TATIANAThe Relationship between Financial Development and Economic Growth in Saudi Arabia: A comparative Analysis before and after Vision 2030 (2000-2023) Abstract This dissertation explores the evolving role of financial development in supporting economic growth in Saudi Arabia, with particular focus on the Vision 2030 reform period. Using annual data from 2000 to 2023, the study addresses the longstanding question of whether expanding financial depth can support diversification in an oil-dependent economy. The analysis uses indicators of private credit, broad money supply (M2), and stock market capitalization, alongside control variables including foreign direct investment (FDI) and government expenditure. Statistical models test both the overall relationship and potential structural changes after 2016, when Vision 2030 reforms began. Additional checks explore causality and the role of external shocks such as oil price volatility. The findings reveal that credit and M2 had little or no significant effect on growth, reflecting inefficiencies in domestic financial intermediation. By contrast, equity market capitalization gained importance after 2016, suggesting that reforms improved the role of capital markets in supporting growth. FDI emerged as a consistent and positive driver of growth, underscoring its role in facilitating diversification, technological transfer, and integration with global markets. While government spending was negatively associated with growth, pointing to fiscal inefficiencies and crowding- out effects. 2 Overall, the results show that while Vision 2030 reforms have begun to strengthen equity markets, the broader finance–growth nexus remains weak. These findings emphasize the need for policies that strengthen institutional quality, improve the efficiency of fiscal spending, and channel financial resources toward productive private sector activities. Limitations of the study include a relatively small sample size and the influence of major exogenous shocks, such as oil price volatility and the Covid-19 pandemic, which complicate long- term trend identification. By providing empirical evidence on the interaction between finance, growth, and reform in a resource-dependent economy, this study contributes to the broader literature on financial development and economic diversification. Nonetheless, the emerging positive signals from equity markets and FDI suggest that Saudi Arabia is on a promising path toward a more dynamic, investment-driven growth model. The findings carry significant policy implications for Saudi Arabia’s ongoing transformation under Vision 2030, as well as for other oil-dependent economies seeking to leverage financial reform as a tool for sustainable growth.13 0