This paper analyses the dynamics of financial deepening and the volatility of business cycle in the United Arab of Emirates (UAE). We use cointegration tests of regime-shift with one and two endogenous structural breaks, respectively, using Gregory and Hansen, Oxford Bulletin of Economics and Statistics, 1996, 58, 555–560 and Hatemi-J, Empirical Economics, 2008, 35, 497–505 approaches. The asymmetry in the underlying relationship of the concerned variables are examined following NARDL model over the period 1974–2016. The findings suggest the presence of regime shifts in the cointegrating relationship and asymmetry between growth volatility and financial deepening. Furthermore, the paper provides evidence of a significant difference in the response of business cycle to negative or positive changes in the financial deepening, which are more pronounced in the short run. Therefore, the obtained asymmetry suggests that business cycle responses are quick and adverse to changes in the financial system in the UAE. The empirical findings of this paper have potential policy implications in this emerging country that is aiming to establish an international reputation in its financial market and become a regional financial hub.

中文翻译：

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阿联酋金融发展与商业周期波动的关系：来自非线性政权转变和不对称测试的证据

本文分析了阿拉伯联合酋长国（UAE）金融深化的动态和商业周期的波动性。我们分别使用 Gregory 和 Hansen, Oxford Bulletin of Economics and Statistics, 1996, 58, 555–560 和 Hatemi-J, Empirical Economics, 2008, 35, 497 进行政权更替的协整检验，其中包括一个和两个内生结构断裂–505 逼近。根据 1974 年至 2016 年期间的 NARDL 模型，检查了相关变量潜在关系的不对称性。研究结果表明，协整关系中存在政权更迭，增长波动与金融深化之间存在不对称。此外，本文提供的证据表明，商业周期对金融深化的消极或积极变化的反应存在显着差异，短期内更为明显。因此，所获得的不对称性表明，商业周期反应是快速的，并且不利于阿联酋金融体系的变化。本文的实证研究结果对这个旨在在其金融市场建立国际声誉并成为区域金融中心的新兴国家具有潜在的政策影响。