Sustainable development: an empirical illustration for Saudi Arabia

The aim of this paper is to highlight the shortcoming of the standard macroeconomic framework when environment is ignored in the implementation of traditional policy practices. Many studies have identified pollution by commenting on the damages inflicted on the environment. In response, regulatory policies have been proposed to rectify and address the economic and health impacts. However, there have been very few studies centred on valuing environmental degradation and internalizing the cost of degradation to selected macroeconomic frameworks. The empirical illustration in this paper seeks to demonstrate the ease with which environmental degradation is internalized in a simple Keynesian framework with reference to a leading Gulf State -- Saudi Arabia. The analysis of environmental degradation is confined to air shed depreciation in terms of carbon dioxide emissions from greenhouse gases and data is from World Development Indicators for the years 1980 to 2012.