Measuring the Long Run Impact of Loans on Agricultural Gross Domestic Product in Saudi Arabia Using Co-integration and Error Correction Models

This study was designed to measure the impact of loans provided by the Government of Saudi Arabia on the total output of the agricultural sector during the time period 1971-2008 AD. The study relied on secondary data published and used modern methods of analysis of recent tests in the Co-integration Test and models of Error Correction Models (ECM), which reflects the dynamic relationship in the short term since the use of standard conventional methods of analysis may often leads to inaccurate results.
The results obtained that the degree of auto regression of the output of the agricultural sector gross capital of the loans in Saudi Arabia is the second differences of the variables. By studying the direction of causality between the two variables show that the GDP of the agricultural sector does not Granger cause capital formation for loans, while significant relationship was confirmed that the composition of capital for loans Granger cause the concept of levels of GDP of the agricultural sector and in conformity with reality in Saudi Arabia due to the support of the agricultural sector through the gross domestic product, which depend on the oil revenues. The  co-integration equation explain the relationship between the total output of the agricultural sector and capital formation for the loans that the contribution of capital formation for the loans to a change in the gross agricultural output in the long run amounts to 69.3%, while the results show that the model error correction rate of growth of total agricultural sector output in the long short equals 7.9%.