Economic Determinants of Environmental Degradation: A Time Series Analysis of Saudi Arabian Economy

Environmental degradation is posing several challenges worldwide and hence Saudi Arabia (KSA) is no exception. This paper therefore focuses on the economy of KSA to explore the main determinants of environmental degradation. The analysis of the study is based on the time-series data covering the period 1990-2022. The “Autoregressive Distributed Lag Modeling (ARDL)” is used for the estimation purpose which is recently developed in the literature for handling non-stationary time series data. For testing the direction of relationship, the study utilizes the causality testing procedure. The results indicated that energy consumption, GDP per capita and foreign direct investment have degraded the environmental quality of KSA during the study period. On the other hand, financial development and natural resource sector have improved the quality of the environment. Furthermore, trade openness appeared to be an irrelevant factor in determining the quality of the environment due to its insignificant coefficient. Finally, the causality testing showed several one-way and one two-way casual relationships among the variables used in the study. Based on the results, the current study presents several important policy implications for the policymakers of KSA. We hope that the current study will add to the literature on the economy of KSA enormously.