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Examining the asymmetric impact of macroeconomic policy in the UAE: Evidence from quartile impulse responses and machine learning

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  • Polyzos, Efstathios

Abstract

The current paper examines the asymmetric effects of changes to monetary and fiscal variables on different types of firms in the UAE. We compute impulse responses based on local projections and select shock and switching variables using machine learning. We examine 180 firms listed in the UAE exchanges and find significant asymmetries among financial and non-financial firms and among low- and high-debt firms when there is a shock to macroeconomic monetary or fiscal variables. Quartile analysis shows that firms belonging to the first and last quartile of debt respond negatively to expansionary policies, while middle-quartile firms respond more positively. Our results demonstrate the importance of comprehending the heterogeneity in the micro characteristics of the underlying corporate environment when evaluating macroeconomic policies. Our work can facilitate the design and implementation of policy in the UAE and helps explain the transmission mechanisms towards corporations.

Suggested Citation

  • 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).
    • Handle: RePEc:eee:joecas:v:26:y:2022:i:c:s1703494922000275
    DOI: 10.1016/j.jeca.2022.e00267
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    1. Khadija Ali Mohammed Abdulrahman Al Ameri, 2023. "Antecedents of Organizational Resilience after COVID-19: The Case of UAE," Sustainability, MDPI, vol. 15(7), pages 1-12, March.

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    More about this item

    Keywords

    Fiscal policy; Monetary policy; Cross-firm asymmetries; Debt; United Arab Emirates;
    All these keywords.

    JEL classification:

    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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