Macroeconomics Of The United Arab Emirates And Its Real Estate Sector

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“A Report on The Macroeconomics of the United Arab Emirates and its Real Estate Sector” Macroeconomic background

The table below contains the calculated growth rates of the nominal GDP for the period 2010-2015. It shows that the highest growth rate was registered in 2011 so, we can say that from 2010 to 2011 the nominal GDP in the United Arab Emirates has increased by 21.84%. On the other side, the highest decrease of the nominal GDP was registered last year when the GDP decreased by 7.30%.
For example, in 2010 the GDP growth rate is:

G_Y= (Y_2010-Y_2009)/Y_2009 =(286049.34-253547.36)/253547.36=12.82% Table 1. The growth rate of the nominal GDP in UAE
Source: Author’s calculations using data from the World Bank
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The relationship between TFP and stock prices has been observed by analysts for centuries and most of their results conclude that a growth in the stock prices generates a growth in productivity on the long-term. So the shocks that have an impact on the stock prices and stimulate companies to invest in new technologies affect productivity on the long-term because it usually takes time for the new technologies to be implemented and generate productivity (Comin et al. 2016).
The relationship between stock prices and total factor productivity is explored by plotting the productivity over the last 5 years and the evolution of the average annual growth rate of the Dubai Financial Market (DFM) index. The evolution of the two variables shows there is a weak negative relationship on the short-term between them so, we can say that the productivity numbers are not consistent with the stock prices. Figure 1. TFP and DFM index
Source: Author’s representation using data from the World Bank and DFM database

Looking at the evolution of the DFM index, we observe there was a concern of a stock market bubble in 2014 because the stock prices were driven very high. However, their expansion was followed in 2015-2016 by a relatively smooth contraction. Figure 2. The Evolution of the DFM index in UAE 2012-2016
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