Measuring and Analyzing the Relationship Between the Components of Money Supply (M2) and the Net Public Budget of the United Arab Emirates During the Period (2005–2023)

Abstract

This study aims to measure and analyze the relationship between the components of money supply (M2) and the net public budget of the United Arab Emirates during the period 2005–2023. The research adopts an analytical approach for the theoretical framework and an econometric approach for the empirical analysis using the Autoregressive Distributed Lag (ARDL) model to examine short- and long-run relationships. The study is based on the hypothesis that a mutual relationship exists between the components of the money supply and the net public budget. The findings indicate statistically significant relationships among the variables, with varying directions in the short and long run. The results highlight the central role of liquidity levels and economic activity dynamics in shaping the interaction between monetary and fiscal policies in the UAE. The study recommends enhancing coordination between fiscal and monetary policies to promote economic stability and reduce budget vulnerabilities to external fluctuations.