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Assessing the role of financial deepening in business cycles: the experience of the United Arab Emirates

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  • Ali Darrat
  • Salah Abosedra
  • Hassan Aly

Abstract

The relation between financial market development and the severity of business cycles in the economy of the United Arab Emirates is investigated. No evidence is found of a dampening effect from financial deepening on cyclical fluctuations in the short-run, but strong effects in the long-run. These results extend recent findings on the financial development/economic growth nexus and imply that growth volatility reductions expected from further financial developments are slow to materialize especially in countries with relatively large and well-functioning financial sectors.

Suggested Citation

  • Ali Darrat & Salah Abosedra & Hassan Aly, 2005. "Assessing the role of financial deepening in business cycles: the experience of the United Arab Emirates," Applied Financial Economics, Taylor & Francis Journals, vol. 15(7), pages 447-453.
    • Handle: RePEc:taf:apfiec:v:15:y:2005:i:7:p:447-453
    DOI: 10.1080/09603100500039417
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