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Does Financial Development Induce Economic Growth in UAE? The Role of Capitalization and Foreign Direct Investment

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  • Rashid Sbia

    (DULBEA, Solvay Brussels School of Economics and Management, Belgium and Ministry of Finance, UAE)

  • Sahel Alrousan

    (Ministry of Finance, UAE)

Abstract

This paper examines the association between financial progress and economic growth in the United Arab Emirates over the period 1975Q1-2012Q4. We have employed Bayer and Hanck (2013) combined non-cointegration to test the long run relationship. Our analysis revealed the existence of cointegration between financial development and economic growth. It also revealed that capitalization and foreign direct investment (FDI) stimulate economic growth. The findings suggest that proper use of FDI and financial policy redesign will sustain economic growth in long term

Suggested Citation

  • Rashid Sbia & Sahel Alrousan, 2016. "Does Financial Development Induce Economic Growth in UAE? The Role of Capitalization and Foreign Direct Investment," International Journal of Economics and Financial Issues, Econjournals, vol. 6(2), pages 703-710.
    • Handle: RePEc:eco:journ1:2016-02-46
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    More about this item

    Keywords

    Financial Development; Foreign Direct Investment; Capital investment; Growth; UAE;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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