The aim of this thesis is to assess the role of the state in economic development in the GCC countries. Three aspects of this subject are investigated. An Indirect role of the state is analyzed through the effect of financial development on the economic growth. And direct roles of the state are examined through the impact of defence spending and that of public infrastructure on the development process. First the role of financial development is analyzed by using three alterative causality tests. The results suggest that the existence of long-run relationship between economic development and the state of financial development in most GCC countries. The results further suggest that financial sector can be a l eading sector for some of the GCC countries. Second, the impact of defence spending on economic development is examined by e mploying VAR/ECM models. The emerging results suggest that defence expenditure appears to retard economic development for countries with relatively heavy defence expenditure (Saudi Arabia and UAE), whilst positive effect is suggested for GCC member with relatively low defence spending (Bahrain and Oman). Third, for one member of GCC (Saudi Arabia) the role of public infrastructure in economic development is analyzed also using VAR/ECM. The results indicate that the high public capital expenditure in Saudi Arabia has insignificant effect in the economic development in the long – run.

The aim of this thesis is to assess the role of the state in economic development in the GCC countries. Three aspects of this subject are investigated. An Indirect role of the state is analyzed through the effect of financial development on the economic growth. And direct roles of the state are e...