The long‐run relationship between savings and investment in oil‐exporting developing countries: a case study of the G ulf A rab states

The relationship between national saving and investment over the long term is examined for six Gulf Arab oil‐exporting developing countries— B ahrain, K uwait, O man, Q atar, S audi A rabia and the U nited A rab E mirates. We show that, provided some large outliers are properly accounted for, long‐run equilibrium relationships between saving and investment (both total and fixed) exist in these countries. Because these countries have typically large current account surpluses, such relationships cannot be explained by standard arguments. Our hypothesis is that the response of investment to saving largely depends on domestic absorptive capacity.