Economic Growth and Savings in GCC:A Cointegration and Causal Relationship Analysis
Ibrahim Alomar

Abstract
While Long run growth theories imply that economic growth is associated with accumulating of the physical capital by more domestic savings, easy transfer of the savings across borders or having financial excess resulted from selling natural resources change nature or results of these theories. This study aims to investigate the relationship between domestic savings and economic growth of GCC. Using time series annual data, the cointegration method was used to conduct nature of the relationship. The main finding is pointing to such a relationship between Domestic savings and economic growth in all of the GCC with different level of significant. The findings suggested that the economic growth rate Granger causes growth rate of savings in 4 countries. The opposite results prevailed in one country, which is Oman. In Bahrain only, a bi directional causality was found. Based on the empirical results, the main conclusion of this study is that income source of a country does play an important role in determining the direction of causality. In those countries where most income comes from natural resources, direction of the causality is from economic growth to domestic savings.

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