UPSI Digital Repository (UDRep)
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UPSI Digital Repository (UDRep)
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| Abstract : Perpustakaan Tuanku Bainun |
| This study investigates the impact of credit market performance on economic security
in the United Arab Emirates (UAE) from 1990 to 2023. Using the credit friction and
market freeze theory, advanced methodologies are employed, including the Gregory-
Hansen cointegration test, autoregressive distributed lag (ARDL) bounds testing,
nonlinear ARDL (NARDL) model, the Kuznets curve, and Toda-Yamamoto causality
test. The Gregory-Hansen test identifies structural breaks, while the ARDL bounds test
confirms a long-term relationship between economic security and credit market
components, including domestic credit supply and nonperforming loans. Results
indicate that both credit market and nonperforming loans negatively affect economic
security. Furthermore, higher lending interest rates and weak institutional quality are
detrimental, whereas rising oil prices, public expenditure, foreign capital inflows, and
real GDP contribute positively to economic security. The NARDL results reveals an
asymmetric effect of domestic credit supply on economic security. Utilizing the
Kuznets curve model, the threshold relationship between economic security and credit
supply is confirmed, with an inverted U-shaped relationship. This suggests that initial
improvements in economic security lead to increased credit, which peaks at around
USD 158.489 billion. Beyond this threshold, further improvements in economic
security lead to reduced credit supply. Causality analysis using the Toda-Yamamoto
test finds bidirectional causality between economic security and both oil prices and
public expenditure. Unidirectional causality is detected from foreign capital inflows,
the credit market, and real GDP to economic security. However, no causality is found
between economic security and nonperforming loans, lending rates, or institutional
quality. The findings imply that sustainable economic security in the UAE depends on
balanced credit market growth, institutional strengthening, and strategic economic
diversification beyond oil dependence. The study concludes that a well-regulated credit
market, supported by sound economic policies and institutional resilience, is essential
for enhancing long-term economic security and sustainable economic development in
the UAE. |
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