The causal relationship between exports and economic growth: time series analysis for UAE (1975-2012)

Kalaitzi, Athanasia (2015) The causal relationship between exports and economic growth: time series analysis for UAE (1975-2012). Doctoral thesis (PhD), Manchester Metropolitan University.

Preview

Available under License Creative Commons Attribution Non-commercial No Derivatives. Download (8MB) | Preview

Abstract

The principal question that this thesis addresses is the validity of the Export-Led Growth hypothesis (ELG) in the United Arab Emirates (UAE), using annual time series data over the period 1975-2012. Therefore, the research identifies and evaluates the causal relationship between exports and economic growth, by shedding further light on the causal effects, subcategories of exports can have. In doing so, various unit root tests have been applied to examine the time-series properties of the variables, while the Johansen cointegration test is employed to test the existence of a long-run relationship between the variables. Moreover, the multivariate Granger causality test and a modified version of Wald test are applied to examine the direction of the short-run and long-run causality respectively. The findings confirm that the ELG hypothesis is valid for UAE in the short-run, highlighting the importance of export sector in the UAE economy. However, by disaggregating merchandise exports into primary and manufactured exports, this research provides evidence that a circular causality exists between manufactured exports and economic growth in the short-run. Primary exports and especially fuel and mining exports, contrary to the generally held belief, do not cause economic growth in UAE, however are essential for the industrial production. In addition, the research provides statistically significant evidence to support the existence of a bidirectional causality between re-exports and economic growth in the long-run. Thus, further increase in the degree of export diversification from oil could accelerate economic growth in UAE.