The export-led growth hypothesis in the United Arab Emirates: 1975-2012

This paper investigates the existence of a causal relationship between merchandise exports and economic growth in the UAE over the period 1975-2012, using an augmented production function. The study applies the Johansen cointegration technique in order to confirm or not the existence of a long-run relationship between exports and economic growth, while a restricted Vector Autoregressive Model is applied in order to construct the Impulse Response Function. Moreover, the pairwise Granger causality test and the Granger test in VECM context are applied to examine the causality between exports and economic growth. The Johansen cointegration test confirms the existence of a long-run relationship between the variables in the model, while the pairwise Granger causality test shows no causal relationship between exports and economic growth. In contrast, the granger causality test based on VECM gives evidence that a unidirectional causality runs from exports to economic growth.