Author :
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ISBN 13 :
Total Pages : 8 pages
Book Rating : 4.:/5 (713 download)
Book Synopsis The Relative Strength of Fiscal and Monetary Policy in Saudi Arabia by :
Download or read book The Relative Strength of Fiscal and Monetary Policy in Saudi Arabia written by and published by . This book was released on 1988 with total page 8 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the early 1960s Milton Friedman and David Meiselman(1) undertook a series of statistical comparisons of several simple forms of Keynesian and Quantity Theory models. While their results came under sharp criticism(2), their results clearly demonstrated that in the United States at least, money rather than autonomous expenditures provides a better explanation of changes in monetary income. Given its assumption of relatively flexible prices and the development of a fairly sophisticated financial system, the quantity theory would with the exception to some of the Newly Industrializing countries such as Singapore, and Taiwan, seem to be more applicable to the advanced industrialized nations. On the other hand the Keynesian model with its underlying assumptions of price rigidity, factor immobility, and underdeveloped capital markets, would seem to be more appropriate for depicting the relative strength of fiscal variables in the developing countries(3). Intuitively, given the importance of oil revenues and government expenditures as a driving force in the Saudi Arabian economy, one might expect that monetary expansion would at most play secondary role in inducing expenditures(4). For example Kernan and Malik argue that in the Saudi Arabian context(S): Real income is dependent (as of the late 197(05) upon the ability to import goods and services rather than the ability to produce goods and services (other than oil); 2. Government spending, even with a budget surplus, can still imply stimulative fiscal policy because most government revenues comes from abroad; and 3. Stimulative fiscal policy leads directly to an increase in the money supply because of the underlying structure of the country's financial markets i.e., their general underdevelopment. In fact, several observers have even gone so far as to refer to the Saudi Arabian economy as one of the purest present day examples of a classic Keynesian type economy.
