Title: Causality between economic growth and investment in the United Arab Emirates

Authors: Salem A. Al-Jundi; Mohammed Seghir Guellil

Addresses: Department of Accounting and Finance and Banking, College of Business, Al Ain University of Science and Technology, P.O. Box 64141, Al Ain, UAE ' Faculty of Economics, Business and Management Sciences, MCLDL Laboratory, University of Mascara, 29000, Algeria

Abstract: The study aims to work out the exact pattern of causality between economic growth rate and each of investment categories in the United Arab Emirates. Causality is examined by numerous researchers. However, few have studied the relationship between growth and investment at macroeconomic level. To the best of my knowledge no one investigates this topic in the UAE. We demonstrate long-term effects of the investment shares in non-oil gross domestic product on economic growth using cointegration and granger causality tests on time series data. The findings indicate unidirectional causality from private investment to non-oil GDP growth rate, from business investment to non-oil GDP growth rate, and from public investment to government investment. The results could be a good tool for policy priorities in which the private sector, within a dynamic open market, is the strongest engine to expand the non-oil economy, especially in the wake of the sharp decline in oil prices.

Keywords: causality; economic growth; investment; private sector; non-oil GDP; unit root; co-integration; granger causality test; United Arab Emirates; UAE.

DOI: 10.1504/IJEBR.2018.092141

International Journal of Economics and Business Research, 2018 Vol.15 No.4, pp.524 - 540

Received: 23 Dec 2016
Accepted: 29 Apr 2017
Published online: 05 Jun 2018 *

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