Transmission of Global Gold and US Monetary Shocks to a Small Open Economy: Evidence from the United Arab Emirates

This study quantifies the transmission of global gold price shocks and US monetary shocks to the refining and trade sector of the United Arab Emirates, and the resulting response of real GDP. As an intermediate node in the global gold value chain, the UAE is exposed to upstream prices, Asian demand, logistics frictions, and, through the AED-USD peg, the US monetary stance. Quarterly data from 2005Q1 to 2025Q4 are used to construct cointegration and error-correction analysis, a structural VAR, and a two-regime threshold error-correction specification. Three cointegrating vectors link gold prices, Asian demand, and logistics costs to UAE refining throughput, re-exports, and gold-linked finance. A US monetary-tightening shock is associated with a contraction across all three UAE variables, whereas a positive gold-price shock is associated with an expansion of similar magnitude. Monetary shocks account for a rising share of forecast error variance at longer horizons, and adjustment is faster in high-rate regimes than in low-rate regimes. Long-run GDP estimates for re-exports are positive and stable; the gold-linked finance estimate is conditional on a calibrated proxy. Scenario simulations shift quarterly GDP growth by 0.4 to 0.6 percentage points, supporting commodity-hub indicators in the macroeconomic monitoring of small open economies under fixed exchange rates.