ABSTRACT
For an open economy like that of Saudi Arabia, without exchange or import restrictions, existence of a strong diversified and viable banking system is of fundamental importance for stability of the economy. A money economy is obviously more efficient and productive than a barter economy. The institution of money is only the first step towards a full-fledged financial/banking system capable of financing economic growth by generating savings and allocating them into profitable investment opportunities. The history of money and banking in the Kingdom of Saudi Arabia may be broken down into three periods: the period prior to the establishment of the Saudi Arabian Monetary Agency (SAMA) in 1952, the period between the establishment of SAMA and 1960, and the post-1960 era. Commercial banking practice in Saudi Arabia has been influenced by both foreign banking practices and local religious conditions. The monetary analysis approach involves the examination of sources of changes in money and quasi-money.
