The Role of Technology Shocks in Explaining Real Business Cycles (RBC) in the United Arab Emirates

(Bandar bin Ahmad Aba)

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Abstract

Technology shocks in a macroeconomic model are events that affect the economic output through its impact on the marginal productivity of factors of production in the economy. This study addressed the role of domestic and global technology shocks in explaining RBC in the United Arab Emirates (UAE) using the Dynamic Stochastic General Equilibrium (DSGE) approach for a small open economy. It also highlighted the similarities and differences in the properties of RBC between the UAE and the USA. The findings of this study showed that global technology shocks are relatively more important than domestic technology shocks in explaining business cycles for the UAE. Furthermore, the results indicated that the properties of RBC for the UAE and the USA are the same for Gross Domestic Product (GDP), Consumption, and Investment Expenditures variables. Key Words: Real business cycles, Technology shocks, UAE
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