IDEAS home Printed from https://ideas.repec.org/a/ris/ecoint/0844.html
   My bibliography  Save this article

The Causal Impact of Stock Market Development on Economic Development in the UAE: An Asymmetric Approach

Author

Listed:
  • Hatemi-J, Abdulnasser

    (Department of Economics and Finance, College of Business and Economics, United Arab Emirates University)

Abstract

This paper investigates the causal impact of the financial sector on the real or economic sector of the UAE. The underlying data is transformed into partial cumulative sums for positive and negative changes in order to conduct asymmetric causality tests. Allowing for asymmetry is consistent with reality since individuals in financial markets have the tendency to respond more powerfully to a negative news than to a positive one. We also capture the propagation mechanism of a shock in each variable by estimating the generalized impulse response functions, which are not sensitive to the way the variables are ordered in the model. The results reveal that the financial sector has indeed a causal impact on the real sector of the economy. However, the reverse causal impact is not found. These underlying causality results are also confirmed by the generalized impulse response functions. L’impatto del mercato azionario sullo sviluppo economico degli Emirati Arabi Uniti:un approccio asimmetrico Lo scopo di questo lavoro è quello di analizzare l’impatto causale del settore finanziario sul settore dell’economia reale degli Emirati Arabi Uniti. I dati presi in considerazione sono trasformati in somme parziali cumulative per mutamenti positivi e negativi al fine di effettuare test causali asimmetrici. Consentire l’asimmetricità è coerente con la realtà in quanto le persone che operano nel settore finanziario hanno la tendenza a reagire maggiormente alle notizie negative anziché a quelle positive. Viene anche studiato il meccanismo con il quale si propaga lo shock in ogni variabile tramite la stima di funzioni generalizzate degli impulsi di reazione, i quali non sono sensibili al modo in cui le variabili sono ordinate nel modello. I risultati evidenziano che il settore finanziario ha sì un impatto causale sul settore reale dell’economia, ma l’impatto contrario non viene riscontrato. Questi risultati di causalità sono confermati dalle funzioni generalizzate degli impulsi di reazione.

Suggested Citation

  • Hatemi-J, Abdulnasser, 2019. "The Causal Impact of Stock Market Development on Economic Development in the UAE: An Asymmetric Approach," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 72(2), pages 171-184.
    • Handle: RePEc:ris:ecoint:0844
    as

    Download full text from publisher

    File URL: http://www.iei1946.it/upload/rivista_articoli/allegati/267_hatemi-jricfinalx.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Al-Mohana, Safa & Hatemi-J, Abdulnasser, 2016. "The Impact of Recent Crisis on the Real Estate Market on the UAE: Evidence from Asymmetric Methods," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 69(4), pages 389-428.
    2. Pan, Lei & Mishra, Vinod, 2018. "Stock market development and economic growth: Empirical evidence from China," Economic Modelling, Elsevier, vol. 68(C), pages 661-673.
    3. Helmut Lütkepohl, 2005. "New Introduction to Multiple Time Series Analysis," Springer Books, Springer, number 978-3-540-27752-1, December.
    4. Alif Darrat, 1999. "Are Financial Deepening and Economic Growth Causally Related? Another Look at the Evidence," International Economic Journal, Taylor & Francis Journals, vol. 13(3), pages 19-35.
    5. Hatemi-J, Abdulnasser, 2020. "Asymmetric Panel Causality Tests with an Application to the Impact of Fiscal Policy on Economic Performance in Scandinavia," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 73(3), pages 389-404.
    6. Toda, Hiro Y. & Yamamoto, Taku, 1995. "Statistical inference in vector autoregressions with possibly integrated processes," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 225-250.
    7. Abdulnasser Hatemi-J, 2012. "Asymmetric causality tests with an application," Empirical Economics, Springer, vol. 43(1), pages 447-456, August.
    8. Ben Naceur, Samy & Ghazouani, Samir & Omran, Mohammed, 2008. "Does stock market liberalization spur financial and economic development in the MENA region?," Journal of Comparative Economics, Elsevier, vol. 36(4), pages 673-693, December.
    9. Abdulnasser Hatemi-J & Youssef El-Khatib, 2016. "An extension of the asymmetric causality tests for dealing with deterministic trend components," Applied Economics, Taylor & Francis Journals, vol. 48(42), pages 4033-4041, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Clement Olalekan Olaniyi & Olaolu Richard Olayeni, 2020. "A new perspective into the relationship between CEO pay and firm performance: evidence from Nigeria’s listed firms," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 22(2), pages 250-277, December.
    2. M. Ajide, Folorunsho, 2020. "Asymmetric Influence Of Financial Development On Unemployment In Nigeria," Ilorin Journal of Economic Policy, Department of Economics, University of Ilorin, vol. 7(2), pages 39-52, June.
    3. Hatemi-J, Abdulnasser & El-Khatib, Youssef, 2023. "The Dividend Discount Model with Multiple Growth Rates of any Order for Stock Evaluation," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 76(1), pages 135-146.
    4. Clement Olalekan Olaniyi, 2020. "Application of Bootstrap Simulation and Asymmetric Causal Approach to Fiscal Deficit-Inflation Nexus," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 12(2), pages 123-140, May.
    5. Polyzos, Efstathios, 2022. "Examining the asymmetric impact of macroeconomic policy in the UAE: Evidence from quartile impulse responses and machine learning," The Journal of Economic Asymmetries, Elsevier, vol. 26(C).
    6. Ayad Hicham, 2021. "Oil Prices and the Algerian Exchange Rate: Is there any Difference with Hidden Co-Integration?," Folia Oeconomica Stetinensia, Sciendo, vol. 21(1), pages 1-17, June.
    7. Veli Yilanci & Onder Ozgur & Muhammed Sehid Gorus, 2021. "Stock prices and economic activity nexus in OECD countries: new evidence from an asymmetric panel Granger causality test in the frequency domain," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-22, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Abdulnasser Hatemi-J, 2020. "Bear Markets and Recessions versus Bull Markets and Expansions," Papers 2009.01343, arXiv.org, revised Nov 2020.
    2. Xiaojuan He & Dervis Kirikkaleli & Melike Torun & Zecheng Li, 2021. "Modeling Economic Risk in the QISMUT Countries: Evidence From Nonlinear Cointegration Tests," SAGE Open, , vol. 11(4), pages 21582440211, October.
    3. Abdulnasser Hatemi-J, 2021. "Dynamic Asymmetric Causality Tests with an Application," Papers 2106.07612, arXiv.org, revised Jun 2021.
    4. Osinubi Tolulope T. & Ajayi Adedoyin O. & Olaniyi Clement O. & Osinubi Olufemi B., 2021. "A New Intuition into Tourism-Inclusive Growth Nexus in Turkey and Nigeria (1995 – 2018)," Economics, Sciendo, vol. 9(1), pages 221-241, June.
    5. Hatemi-J, Abdulnasser, 2020. "Asymmetric Panel Causality Tests with an Application to the Impact of Fiscal Policy on Economic Performance in Scandinavia," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 73(3), pages 389-404.
    6. Clement Olalekan Olaniyi & Olaolu Richard Olayeni, 2020. "A new perspective into the relationship between CEO pay and firm performance: evidence from Nigeria’s listed firms," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 22(2), pages 250-277, December.
    7. Manuel Ennes Ferreira & João Dias & Jelson Serafim, 2022. "Stock Market and Economic Growth: Evidence from Africa," Working Papers REM 2022/0228, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    8. Koray Yıldırım & Neşe Algan & Harun Bal, 2024. "Investment Hysteresis: An Empirical Essay Turkish Case," Evaluation Review, , vol. 48(1), pages 143-176, February.
    9. Abdulnasser Hatemi-J & Abdulrahman Al Shayeb & Eduardo Roca, 2017. "The effect of oil prices on stock prices: fresh evidence from asymmetric causality tests," Applied Economics, Taylor & Francis Journals, vol. 49(16), pages 1584-1592, April.
    10. Veli Yilanci & Onder Ozgur & Muhammed Sehid Gorus, 2021. "Stock prices and economic activity nexus in OECD countries: new evidence from an asymmetric panel Granger causality test in the frequency domain," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-22, December.
    11. Tiwari, Aviral Kumar, 2014. "The asymmetric Granger-causality analysis between energy consumption and income in the United States," Renewable and Sustainable Energy Reviews, Elsevier, vol. 36(C), pages 362-369.
    12. Hatemi-J, Abdulnasser & Mustafa, Alan, 2016. "A MS-Excel Module to Transform an Integrated Variable into Cumulative Partial Sums for Negative and Positive Components with and without Deterministic Trend Parts," MPRA Paper 73813, University Library of Munich, Germany.
    13. Clement Olalekan Olaniyi, 2020. "Application of Bootstrap Simulation and Asymmetric Causal Approach to Fiscal Deficit-Inflation Nexus," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 12(2), pages 123-140, May.
    14. İbrahim ÖZMEN, 2022. "New Evidence from Government Debt and Economic Growth in Core and Periphery European Union Countries : Asymmetric Panel Causality," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 167-187, October.
    15. Adedeji Daniel Gbadebo, 2023. "Dynamic Asymmetric Causality of Bitcoin’s Price-Volume Relation," SAGE Open, , vol. 13(4), pages 21582440231, December.
    16. Villanthenkodath, Muhammed Ashiq & Mahalik, Mantu Kumar, 2021. "Does economic growth respond to electricity consumption asymmetrically in Bangladesh? The implication for environmental sustainability," Energy, Elsevier, vol. 233(C).
    17. Shahbaz, Muhammad & Hoang, Thi Hong Van & Mahalik, Mantu Kumar & Roubaud, David, 2017. "Energy consumption, financial development and economic growth in India: New evidence from a nonlinear and asymmetric analysis," Energy Economics, Elsevier, vol. 63(C), pages 199-212.
    18. Bilgehan TEKIN & Erol YENER, 2019. "The causality between economic growth and stock market in developing and developed countries: Toda-Yamamoto approach," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(2(619), S), pages 79-90, Summer.
    19. Nikeel Kumar & Ronald Ravinesh Kumar & Radika Kumar & Peter Josef Stauvermann, 2020. "Is the tourism–growth relationship asymmetric in the Cook Islands? Evidence from NARDL cointegration and causality tests," Tourism Economics, , vol. 26(4), pages 658-681, June.
    20. Camgöz, Mevlüt & Topal, Mehmet Hanefi, 2022. "Identifying the asymmetric price dynamics of Islamic equities: Implications for international investors," Research in International Business and Finance, Elsevier, vol. 60(C).

    More about this item

    Keywords

    Stock Market; Economic Development; Asymmetry; the UAE; Causality;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G19 - Financial Economics - - General Financial Markets - - - Other

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ris:ecoint:0844. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Angela Procopio (email available below). General contact details of provider: https://edirc.repec.org/data/cacogit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.