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Volume :35 Issue : 134 2009      Add To Cart                                                                    Download

Guns and Roses: Military Spending, Financial Aid and Economic Growth in the Case of Saudi Arabia

Auther : Dr. Hamad Bin M. Al Al-Sheikh - Dr. Ahmed A. A. Asseery

     This study uses a multivariate cointegration approach to investigate empirically the long-run determinants of the Saudi military spending (Guns), financial aid (Roses) donated by Saudi Arabia to Arab States and the output of the economy over the period 1963-2001.  The study postulates that the Saudi political regime in reaction to the long perceived military threat posed by Tehran uses the accumulation of arms as a conventional deterrent policy instrument and the financial aid as a political policy instrument to both consolidate the positions of some political regimes in the region and gain their support against this threat.  While the financial aid has given Saudi Arabia the role of an anchor of stability and peace in the region, the empirical results suggest the existence of ``La Gabelle>> notion.  The study, also, shows that government expenditure, disaggregated investment and foreign workers do not promote economic growth.  Given the rise in unemployment and in the number of poor among Saudi nationals without sound welfare programs, the study calls for the review and the restructuring of both the welfare system and the foreign employment policies in the public and the private sectors.

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May 18, 2017

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