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Article
Impact of the Monetary Policy on the UAE Economic Growth (Post Financial Crises)
Author(s)
Muhamad Abdul Aziz Muhamad Saleh Jumaa, Maher Ibrahim Mikhaeil Tawdrous
Full-Text PDF XML 598 Views
DOI:10.17265/1537-1514/2019.01.002
Affiliation(s)
City University College of Ajman, Ajman, United Arab Emirates
ABSTRACT
The monetary policy plays
an act role in a country’s economic growth if it is implemented effectively to
maintain price stability and to keep inflation rate at minimum level. Such
goals are achieved through a process by which monetary authority of a country
controls the supply of money, availability of money, and cost of money or
interest rate. Monetary policy is directly associated with the changes in the
economy. Thus, the primary objective of the United Arab Emirates (UAE) is
promoting the economic growth through its tools, i.e., interest rate, inflation, and money supply to stabilize the appealing economic
condition level within the country. The main focus of the paper is to
investigate the role of monetary policy in the UAE for the last 10 years on the
economic growth of the country. So, a descriptive analysis of the influences of
the monetary policy on the Gross Domestic Product (GDP) has been carried out to measure the correlation
between them. The data have been obtained from different sources. Information on
the Gross Domestic Product and money supply were extracted from the Globe
Development Indicators Information (2018). Whereas, the information on the
interest rates and inflation are obtained from the official web site of the UAE
Central Bank. The analysis outcomes reveal that there is a positive correlation
between money supply and the economic growth in the UAE, but it was
insignificant. So, there is insufficient evidence supporting this relationship.
Also, it has been found that if money supply changes, the interest rate will
not change tangibly to enhance the investment, and thus, the economic growth in the country since the monetary
policy in the UAE is not totally independent. However, the analysis outcomes
showed inverse impact of the interest rate on the GDP with significant
evidence. The same insignificant result has been found on the impact of the
inflation rates on the GDP. Therefore, the impact of monetary policy on the
economic growth was insignificant except for the interest rates.
KEYWORDS
money supply, monetary policy, interest rates, inflation, GDP, monetary authority, central bank
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