This paper examines the importance of the U.S. external shocks and monetary transmission mechanism channels in the United Arab Emirates (UAE). The focal points are to analyse whether or not the U.S. external shocks are relevant to influence the UAE economy and to identify the significance of the two channels of monetary transmission mechanisms (the interest rate and the exchange rate channels) in the UAE during the global financial crisis of 2007/2008. Using a non-recursive SVAR identification scheme, the results of impulse response function suggest that the U.S. external shocks affect the UAE output and inflation rate quickly and strongly. However, the interest rate and the exchange rate channels of monetary transmission mechanisms are not very effective in the UAE. This is consistent with the hypothesis of the study in which the interest rate and the exchange rate channels may not be effective due to the fixed exchange rate regime and the interest rate pegging in that country. Another key finding is that the world oil price has a dominant role in explaining major macroeconomic fluctuations in the UAE economy, which suggests that the UAE economy is vulnerable to the world's oil price shocks. This finding suggests that the UAE policy makers need to consider diversifying their export sectors in mitigating the economic fluctuations.