The importance of the u.s. shocks and monetary transmission mechanism channels in the United Arab Emirates

Research output: Contribution to journalArticle

Abstract

This paper examines the importance of the U.S. external shocks and monetary transmission mechanism channels in the United Arab Emirates (UAE). The focal points are to analyse whether or not the U.S. external shocks are relevant to influence the UAE economy and to identify the significance of the two channels of monetary transmission mechanisms (the interest rate and the exchange rate channels) in the UAE during the global financial crisis of 2007/2008. Using a non-recursive SVAR identification scheme, the results of impulse response function suggest that the U.S. external shocks affect the UAE output and inflation rate quickly and strongly. However, the interest rate and the exchange rate channels of monetary transmission mechanisms are not very effective in the UAE. This is consistent with the hypothesis of the study in which the interest rate and the exchange rate channels may not be effective due to the fixed exchange rate regime and the interest rate pegging in that country. Another key finding is that the world oil price has a dominant role in explaining major macroeconomic fluctuations in the UAE economy, which suggests that the UAE economy is vulnerable to the world's oil price shocks. This finding suggests that the UAE policy makers need to consider diversifying their export sectors in mitigating the economic fluctuations.

Original languageEnglish
Pages (from-to)47-60
Number of pages14
JournalPertanika Journal of Social Science and Humanities
Volume23
Issue numberMay
Publication statusPublished - 1 May 2015

Fingerprint

United Arab Emirates
interest rate
oil price
fluctuation
economy
Monetary transmission mechanism
inflation
financial crisis
macroeconomics
Interest rates
Exchange Rates
Interest Rates

Keywords

  • Monetary Transmission Mechanism
  • SVAR
  • The U.S. External Shocks
  • United Arab Emirates

ASJC Scopus subject areas

  • Arts and Humanities(all)
  • Business, Management and Accounting(all)
  • Economics, Econometrics and Finance(all)
  • Social Sciences(all)

Cite this

@article{09a9dbf43d124235b3683a904fe4343f,
title = "The importance of the u.s. shocks and monetary transmission mechanism channels in the United Arab Emirates",
abstract = "This paper examines the importance of the U.S. external shocks and monetary transmission mechanism channels in the United Arab Emirates (UAE). The focal points are to analyse whether or not the U.S. external shocks are relevant to influence the UAE economy and to identify the significance of the two channels of monetary transmission mechanisms (the interest rate and the exchange rate channels) in the UAE during the global financial crisis of 2007/2008. Using a non-recursive SVAR identification scheme, the results of impulse response function suggest that the U.S. external shocks affect the UAE output and inflation rate quickly and strongly. However, the interest rate and the exchange rate channels of monetary transmission mechanisms are not very effective in the UAE. This is consistent with the hypothesis of the study in which the interest rate and the exchange rate channels may not be effective due to the fixed exchange rate regime and the interest rate pegging in that country. Another key finding is that the world oil price has a dominant role in explaining major macroeconomic fluctuations in the UAE economy, which suggests that the UAE economy is vulnerable to the world's oil price shocks. This finding suggests that the UAE policy makers need to consider diversifying their export sectors in mitigating the economic fluctuations.",
keywords = "Monetary Transmission Mechanism, SVAR, The U.S. External Shocks, United Arab Emirates",
author = "F. Shariq and Zaidi, {Mohd Azlan Shah} and {Abdul Karim}, Zulkefly",
year = "2015",
month = "5",
day = "1",
language = "English",
volume = "23",
pages = "47--60",
journal = "Pertanika Journal of Social Science and Humanities",
issn = "0128-7702",
publisher = "Universiti Putra Malaysia",
number = "May",

}

TY - JOUR

T1 - The importance of the u.s. shocks and monetary transmission mechanism channels in the United Arab Emirates

AU - Shariq, F.

AU - Zaidi, Mohd Azlan Shah

AU - Abdul Karim, Zulkefly

PY - 2015/5/1

Y1 - 2015/5/1

N2 - This paper examines the importance of the U.S. external shocks and monetary transmission mechanism channels in the United Arab Emirates (UAE). The focal points are to analyse whether or not the U.S. external shocks are relevant to influence the UAE economy and to identify the significance of the two channels of monetary transmission mechanisms (the interest rate and the exchange rate channels) in the UAE during the global financial crisis of 2007/2008. Using a non-recursive SVAR identification scheme, the results of impulse response function suggest that the U.S. external shocks affect the UAE output and inflation rate quickly and strongly. However, the interest rate and the exchange rate channels of monetary transmission mechanisms are not very effective in the UAE. This is consistent with the hypothesis of the study in which the interest rate and the exchange rate channels may not be effective due to the fixed exchange rate regime and the interest rate pegging in that country. Another key finding is that the world oil price has a dominant role in explaining major macroeconomic fluctuations in the UAE economy, which suggests that the UAE economy is vulnerable to the world's oil price shocks. This finding suggests that the UAE policy makers need to consider diversifying their export sectors in mitigating the economic fluctuations.

AB - This paper examines the importance of the U.S. external shocks and monetary transmission mechanism channels in the United Arab Emirates (UAE). The focal points are to analyse whether or not the U.S. external shocks are relevant to influence the UAE economy and to identify the significance of the two channels of monetary transmission mechanisms (the interest rate and the exchange rate channels) in the UAE during the global financial crisis of 2007/2008. Using a non-recursive SVAR identification scheme, the results of impulse response function suggest that the U.S. external shocks affect the UAE output and inflation rate quickly and strongly. However, the interest rate and the exchange rate channels of monetary transmission mechanisms are not very effective in the UAE. This is consistent with the hypothesis of the study in which the interest rate and the exchange rate channels may not be effective due to the fixed exchange rate regime and the interest rate pegging in that country. Another key finding is that the world oil price has a dominant role in explaining major macroeconomic fluctuations in the UAE economy, which suggests that the UAE economy is vulnerable to the world's oil price shocks. This finding suggests that the UAE policy makers need to consider diversifying their export sectors in mitigating the economic fluctuations.

KW - Monetary Transmission Mechanism

KW - SVAR

KW - The U.S. External Shocks

KW - United Arab Emirates

UR - http://www.scopus.com/inward/record.url?scp=84943252424&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84943252424&partnerID=8YFLogxK

M3 - Article

VL - 23

SP - 47

EP - 60

JO - Pertanika Journal of Social Science and Humanities

JF - Pertanika Journal of Social Science and Humanities

SN - 0128-7702

IS - May

ER -