Abstract

This research is part of a joint project between the Saudi Arabian Monetary Authority (SAMA) and the King Abdullah Petroleum Studies and Research Center (KAPSARC).

This paper estimates a micro-based life cycle consumption model for Saudi Arabia over the period 1970-2017

The estimate of consumption behavior in this paper is identified as centering on the income effect and the wealth effect:

The income effect is defined as the direct impact on consumption of a variation in income.

The wealth effect is defined as a consumer’s perception of a change in his or her wealth and a concomitant decision either to liquidate some of that wealth to enable an increase in consumption (in the case of a positive wealth change) or to decrease consumption in order to restore the consumer’s desired level of wealth (in the case of a negative wealth change).

The wealth effect on consumption can be substantially different from the income effect because it is more closely related to consumers’ expectations of, and fluctuations in, the value of real and financial assets.

The authors’ estimation shows that both income and wealth have significant effects on household consumption in Saudi Arabia, with a long-run marginal propensity to consume (MPC) out of income of around 0.73-0.95, and out of wealth of around 0.06.

The sensitivity of consumption to income and wealth in Saudi Arabia appears to be consistent with the growth of the Saudi economy.

Authors

Goblan Al Gahtani

Goblan Al Gahtani

Goblan is a former senior researcher at the Saudi Arabian Monetary Agency (SAMA), Monetary Policy and Financial Stability Department and… Goblan is a former senior researcher at the Saudi Arabian Monetary Agency (SAMA), Monetary Policy and Financial Stability Department and is now Senior Director at the Royal Court Support Decision Center, Riyadh. He holds a Ph.D. in Economics from the University of Kansas.

Carlo Andrea Bollino

Visiting Researcher Carlo Andrea is a visiting researcher at KAPSARC, a professor of economics at the University of Perugia, and a professor of energy economics… Carlo Andrea is a visiting researcher at KAPSARC, a professor of economics at the University of Perugia, and a professor of energy economics at the University Luiss, Rome. He has been the president of the Italian Association for Energy Economics since 2014 and was the president of the International Association for Energy Economics in 2008. His other roles have included energy advisor to Italy's minister of industry, president of the Italian Electric Transmission Network, chief economist at Eni, economist at the Bank of Italy, research associate at United Nations' Project LINK, and lecturer and professor of economics at the universities of Pennsylvania (United States), Campobasso, Sassari and Urbino (Italy). Carlo Andrea's research investigates econometric modeling, consumer behavior, energy markets, sustainable and renewable energy, liberalization and regulation policy. He has authored over 200 scientific articles, is the chief editor of the Review of Economics and Institutionsand a member of the editorial board of Energies.

Expertise

  • Econometric modeling
  • Consumer behavior
  • Energy markets
  • Sustainable and renewable energy
  • Liberalization and regulation policy

Publications See all Carlo Andrea Bollino’s publications

Simona Bigerna

Simona Bigerna

Associate Professor of Economics, University of Perugia

Axel Pierru

Program Director Axel is the director of KAPSARC’s Energy and Macroeconomics program. From October 2018 to March 2019, he was KAPSARC’s interim… Axel is the director of KAPSARC's Energy and Macroeconomics program. From October 2018 to March 2019, he was KAPSARC's interim vice president of research. Axel joined KAPSARC in 2011, after spending 15 years at IFP Energies Nouvelles in France, where he led research, consulting and training projects. Axel received his Ph.D. in economics from the Pantheon-Sorbonne University in Paris. He undertakes applied research that combines methodological innovation with practical relevance for policymaking. His research is focused on energy economics, policy, finance, oil pricing, and energy-exporting economies. Axel has been published extensively, with over 40 peer-reviewed journal papers to his name.

Expertise

  • Energy modelling
  • Energy economics
  • Energy policy
  • Oil pricing and finance

Publications See all Axel Pierru’s publications

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