The Policy Of Targeting Inflation In The Kingdom of Saudi Arabia And Equilibrium Relations Using The Error Correction Model A standard study during the period 2023 - 1990 AD

Abstract

The study aimed to build a measurement model for the inflation targeting policy that helps to avoid the problem of overlapping targets, and the problem of the study is that do the variables behave similarly in the long term? Accordingly, the study imposed the study imposed a main hypothesis, which is that the determinants of the inflationary gap do not tend to balance in the long term, and the study followed in the theoretical framework on the historical method, but in the practical framework, it relied on the method during the construction of a measurement model that studies the possibility of an equilibrium relationship linking the inflationary gap and its determinants (money supply - GDP - imports - exports) in the long term in the Kingdom of Saudi Arabia during the period from) 2023-1990 AD(Which helps the Central Bank to be more flexible in dealing with supply and demand shocks and reduce the occurrence of the problem of slowdown resulting from the pressures of the expansion of the money supply and the study reached a number of results, including the safety of the model statistically, where all variables of the estimated model are significant except for the variable imports and also there is a high adjustment speed for inflation determinants amounted to (18%) That is, when any shock occurs, it takes a year and a month towards its equilibrium value, and the determinants The inflationary gap between them tends to balance in the long term, so the study recommended the need to rationalize the consumption behavior of members of society as well as control the volume of cash liquidity by setting strict conditions for granting loans.