Analysing the impact of selected macroeconomic variables on public expenditure in the United Arab Emirates (UAE)
<p>The objective of this study is to evaluate the impact of selected macroeconomic</p><p>variables on public expenditure in the UAE during the 1975-2020 period, based on the</p><p>Wagner (1883) law of increasing state activities....
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| Format: | thesis |
| Language: | eng |
| Published: |
2022
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| Subjects: | |
| Online Access: | https://ir.upsi.edu.my/detailsg.php?det=9504 |
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| Summary: | <p>The objective of this study is to evaluate the impact of selected macroeconomic</p><p>variables on public expenditure in the UAE during the 1975-2020 period, based on the</p><p>Wagner (1883) law of increasing state activities. The study employs several estimation</p><p>techniques including the Gregory-Hansen cointegration approach, Autoregressive</p><p>Distributed Lag (ARDL) bounds testing technique, the Canonical Cointegrating</p><p>Regression (CCR), Fully Modified Ordinary Least Squares (FMOLS) estimators, the</p><p>Non-linear ARDL (NARDL) method, and the Toda-Yamamoto causality procedure.</p><p>The results of the cointegration tests demonstrate the presence of a long-term</p><p>relationship between public expenditure and the selected variables. Further, the results</p><p>of the different estimation techniques illustrate that oil price, tax burden, fiscal deficit,</p><p>outward flow of money and FDI, and interest rate influence the level of public</p><p>expenditure significantly both in the short-term and the long-term. Moreover, adopting</p><p>the NARDL method, the results suggest that interest rate has an asymmetric effect on</p><p>public expenditure, with positive and negative shocks influence public expenditure</p><p>level differently. Following the Kuznets hypothesis framework, the results illustrate a</p><p>significant inverted U-shaped association between fiscal deficit and government</p><p>expenditure. This suggests that an increase in fiscal deficit is associated with a rise in</p><p>public expenditure till fiscal deficit attains a peak, and then a decline in public</p><p>expenditure over and above the peak-point. Furthermore, the Toda-Yamamoto causality</p><p>test results indicate a two-way causality from public expenditure to fiscal deficit (and</p><p>oil price); a one-way causality running from outflow of money (and outward flow of</p><p>FDI) to public expenditure; and a unidirectional causality from public expenditure to</p><p>tax burden. The study recommends actions aimed at diversifying the UAEs public</p><p>revenue, strict monitor of tax collection and blockage of tax leakages, reduction of fiscal</p><p>deficit, elimination of unofficial remittance flows, promotions of investor-friendly trade</p><p>policies, and the stabilisation of the interest.</p> |
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