The Effect of Inflation and Unemployment on the Gross Domestic Product of the Kingdom of Saudi Arabia

Abstract

The purpose of this paper is to study the cause-and-effect relationship between both inflation and unemployment on the real GDP and GDP per capita for Saudi Arabia. The Data was collected from the (Macrotrends) website for the period from 1969 to 2022. The time series analysis was employed to investigate this relationship. A series of analysis was employed to investigate this relationship. Our results had indicated that inflation had no significant effect on both GDP and GDP per capita. Meanwhile, unemployment had a positive significant effect on GDP and GDP per capita. Okin's Law was used to further investigate this relationship, resulting in a negative significant relationship between unemployment and both GDP and GDP per capita. The paper had concluded that unemployment had a negative significant effect on Saudi Arabia's economy. This led to several recommendations; the most important is employing policies that target reducing unemployment.