Aging Population and Economic Growth in Saudi Arabia: Evidence from ARDL Approach

Abstract

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Globally, there is a significant debate on the Aging population matter among the researchers and government authorities, however, its adverse impacts, specifically economic impacts, are a controversial issue. This paper intends to assess the long and short run impacts of population aging on the economic growth of Kingdom of Saudi Arabia (KSA). Using annul data for the period 1981-2021 and applying the “Autoregressive Distributed Lag (ARDL)” framework, we show that population again is indeed detrimental for the long run growth performance of KSA. On the other hand, age dependency has impacted the growth performance positively. Moreover, human capital and domestic investment have positively impacted economic growth which is consistent with prior theoretical and empirical literature. Furthermore, inflation rate has negatively influenced economic growth while trade openness has not had the desirable significant impact on economic growth. Moreover, the short run analysis shows that economic growth positively responds to changes in trade and domestic investment and negatively to changes in inflation rate. Finally, the causality analysis displayed several one-way and two-way causal relationships among the variables including the bidirectionality between population aging and economic growth. Our results have important policy implications for the policymakers of the economy of KSA.