Authors: Mohammed N. Chaker; Ariba Sabah; Fares Al-Homsi
Addresses: College of Business Administration, Ajman University, P.O. Box 346, Ajman, UAE ' College of Business Administration, Ajman University, P.O. Box 346, Ajman, UAE ' College of Business Administration, Ajman University, P.O. Box 346, Ajman, UAE
Abstract: The paper evaluates the causal relationship between foreign direct investment (FDI) and the economic growth of the UAE. The study covers variables of FDI, labour force, capital formation, export and gross domestic products (GDP) for a period from 1985 to 2017 on a monthly basis. To base the analyses, the ADF test for unit root, cointegration analysis, and Granger causality have been employed. The results indicate that all the variables were nonstationary at the level and became stationary at first difference. The cointegration analysis revealed that there is a bivariate cointegration between capital formation, FDI, GDP, and labour, whereas the cointegration relation also exists between export and labour along with FDI and GDP, FDI-Labour. The results of long relationship are validated with Granger causality where there was unidirectional causality between capital and FDI, GDP and labour, along with causality between export and labour. The paper is significant as it is first of its kind as proofed from empirical findings, as it covers UAE for the given period.
Keywords: FDI; foreign direct investment; labour force; capital formation; export; GDP; gross domestic products; unit root test; co-integration analysis; Granger causality test; UAE.
Journal for Global Business Advancement, 2019 Vol.12 No.6, pp.746 - 764
Received: 10 Dec 2019
Accepted: 28 Feb 2020
Published online: 10 Jun 2020 *