Abstract
Abstract The present paper studies empirically the relationship between government spending and non-oil economic growth in the UAE for the last four decades by using the vector autoregression (VAR) approach. The findings of the study suggest that the implementation of expansionary policy, through the intensification of current and development public expenditures, induces an increase in the non-oil economic growth during the subsequent periods of the government spending shock. Thus, the implementation of expansionary government spending stimulates the UAE economy, especially during recession periods. The study suggests that policymakers should concentrate their spending on the right projects, as well as on research and development. Moreover, they should channel their transfers and subsidies to the productive sectors, and they should ensure that higher productivity in public institutions is in conjunction with the rise in wages and salaries to achieve sustainable economic growth.
Highlights
Following the global financial crisis that started in the U.S in 2008 and that was transmitted to the global markets, policymakers responded differently by implementing various expansionary policies
Foreign Direct Investment (FDI) and Gross Fixed Capital Formation (GFCF) are included in our estimation since these variables have a significant impact on the non-oil economy in the United Arab Emirates (UAE)
The present study has investigated the dynamics of the relationship between government spending and non-oil economic growth in the UAE during the period 1980–2016
Summary
Following the global financial crisis that started in the U.S in 2008 and that was transmitted to the global markets, policymakers responded differently by implementing various expansionary policies. A fiscal stimulus policy was implemented to stimulate the economy by providing tax cuts and intensifying government spending. The impact of a fiscal stimulus on a country’s economic growth is still widely debated. Pro-Keynesian economics suggest that an increase in government expenditures during recession periods has a positive impact on economic growth. Based on this supposition, the current budget deficit caused by the increase in government spending is compensated by higher demand and a higher level of investments
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
