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

Rashid Sbia () and Sahel Al Rousan ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper investigates the relationship between financial development and economic growth in case of UAE over the period of 1975Q1-2012Q4. The issue of unit root properties of the variables is solved by employing structural break unit root test. We have employed Bayer-Hanck combined cointegration to test the long run relationship between the variables. Our analysis revealed the existence of cointegration between financial development and economic growth. Financial development induces economic growth. Foreign direct investment stimulates economic growth. Capitalization also increases economic growth. This paper suggests using foreign direct investment appropriately redesigning financial policy for sustainable economic growth in long span of time.

Keywords: Financial Development; FDI; Capital Investment; Economic Growth; UAE; GCC; MENA. (search for similar items in EconPapers)
JEL-codes: C32 E22 E62 F43 G18 G28 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-ara, nep-fdg and nep-mac
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