Publisher Connection: Export-Led Growth in the UAE: Multivariate Causality Between Primary Exports, Manufactured Exports and Economic Growth

The principal question that this research addresses is the validity of the Export-Led Growth hypothesis (ELG) in the United Arab Emirates (UAE) over the period 1981–2012, focusing on the causality between primary exports, manufactured exports and economic growth. Unit root tests are applied to examine the time-series properties of the variables, while the Johansen cointegration test is performed to confirm or not the existence of a long-run relationship between the variables. Moreover, the multivariate Granger causality test and a modified version of Wald test are applied to examine the direction of the short-run and long-run causality respectively. The cointegration analysis reveals that manufactured exports contribute more to economic growth than primary exports in the long-run. In addition, this research provides evidence to support a bi-directional causality between manufactured exports and economic growth in the short-run, while the Growth-Led Exports (GLE) hypothesis is valid in the long-run for UAE

Choosing the Best Volatility Models: The Model Confidence Set Approach

This paper applies the model confidence set (MCS) procedure of Hansen, Lunde and Nason (2003) to a set of volatility models. An MCS is analogous to the confidence interval of a parameter in the sense that it contains the best forecasting model with a certain probability. The key to the MCS is that it acknowledges the limitations of the information in the data. The empirical exercise is based on 55 volatility models and the MCS includes about a third of these when evaluated by mean square error, whereas the MCS contains only a VGARCH model when mean absolute deviation criterion is used. We conduct a simulation study which shows that the MCS captures the superior models across a range of significance levels. When we benchmark the MCS relative to a Bonferroni bound, the latter delivers inferior performance. Copyright 2003 Blackwell Publishing Ltd.