Book Description

This thesis focuses on means of forecasting Saudi Arabian military expenditures and the effect of such expenditures on the United States. Saudi Arabia is one of the largest purchasers of American arms and will continue to be for many years. Saudi Arabia has experienced several recent changes in economic and government policy. Using exponential smoothing techniques and linear regression, we isolated several trends in Saudi Arabian military expenditures. Using two linear regression models, military expenditures were then forecast with excellent results. The first model considered the assumption that Gulf War spending would continue. This model uses Saudi Arabian Gross Domestic Product lagged by three years and the current year force size as explanatory variables. The second model considers the assumption of post-war reductions and is based only on the Saudi Arabian Gross Domestic Product lagged by three years. Using decision analysis, it was possible to consider the implications of these forecasts for the United States. The decision analysis model considered several relevant contemporary issues, including succession of the Saudi Arabian King, the Foreign Military Sales policy of the United States, associated uncertainties, and risk.