Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Analysis of Islamic banks' financing and economic growth: a panel cointegration approach

Analysis of Islamic banks' financing and economic growth: a panel cointegration approach Purpose – This paper seeks to use empirical evidence to examine the role of Islamic banks' financing on economic performance of selected countries (Malaysia, Indonesia, Bahrain, UAE, Saudi Arabia, Egypt, Kuwait, Qatar and Yemen). Design/methodology/approach – Using quarterly data (2000:1‐2010:4), this paper utilizes the panel cointegration approach models framework. Findings – The results generally signify that, in the long run, Islamic banks' financing is positive and significantly correlated with economic growth and capital accumulation in these countries. The results obtained from the Granger causality test reveal a positive and statistically significant relationship between economic growth and Islamic banks' financing in the short run and in the long run. It also found that the long run relationship is stronger than the short run relationship. Originality/value – This paper uses empirical evidence to show the effect of Islamic banks' financing on economic growth of selected Islamic countries. To the best of the authors' knowledge, most of the studies in this field have applied the bound testing approach of cointegration, error correction models (ECMs), Auto Regressive Distributed lag (ARDL) and Vector Autoregressive Model (VAR), and the coefficients obtained by these models cannot be deemed as a general finding applicable for other countries. The superiority of this article is in applying the FMOLS model, which has stable and consistent coefficients and is also a dynamic model. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Islamic and Middle Eastern Finance and Management Emerald Publishing

Analysis of Islamic banks' financing and economic growth: a panel cointegration approach

Download PDF
17 pages

Loading next page...
 
/lp/emerald-publishing/analysis-of-islamic-banks-financing-and-economic-growth-a-panel-1PbLnlIjPC
Publisher
Emerald Publishing
Copyright
Copyright © 2013 Emerald Group Publishing Limited. All rights reserved.
ISSN
1753-8394
DOI
10.1108/17538391311329842
Publisher site
See Article on Publisher Site

Abstract

Purpose – This paper seeks to use empirical evidence to examine the role of Islamic banks' financing on economic performance of selected countries (Malaysia, Indonesia, Bahrain, UAE, Saudi Arabia, Egypt, Kuwait, Qatar and Yemen). Design/methodology/approach – Using quarterly data (2000:1‐2010:4), this paper utilizes the panel cointegration approach models framework. Findings – The results generally signify that, in the long run, Islamic banks' financing is positive and significantly correlated with economic growth and capital accumulation in these countries. The results obtained from the Granger causality test reveal a positive and statistically significant relationship between economic growth and Islamic banks' financing in the short run and in the long run. It also found that the long run relationship is stronger than the short run relationship. Originality/value – This paper uses empirical evidence to show the effect of Islamic banks' financing on economic growth of selected Islamic countries. To the best of the authors' knowledge, most of the studies in this field have applied the bound testing approach of cointegration, error correction models (ECMs), Auto Regressive Distributed lag (ARDL) and Vector Autoregressive Model (VAR), and the coefficients obtained by these models cannot be deemed as a general finding applicable for other countries. The superiority of this article is in applying the FMOLS model, which has stable and consistent coefficients and is also a dynamic model.

Journal

International Journal of Islamic and Middle Eastern Finance and Management – Emerald Publishing

Published: Jun 14, 2013

Keywords: Islamic banking; Economic growth; Panel cointegration analysis; Financial analysis

References

  • The relationship between energy consumption, energy prices and economic growth: case study (OPEC countries)
    Abbasinejad, H.; Gudarzi Farahani, Y.; Asghari Ghara, E.
  • Islamic banking and economic growth: the Indonesian experience
    Abduh, M.; Azmi Omar, M.
  • Economic development in Islamic perspective revisited
    Ahmad, A.
  • Financial development and economic growth in the Middle‐East
    Al‐Awad, M.; Harb, N.
  • The relationship between energy consumption, energy prices and economic growth: time series evidence from Asian developing countries
    Asafu‐Adjaye, J.
  • Econometric Analysis of Panel Data
    Baltagi, B.H.
  • Stock markets, banks, and growth: panel evidence
    Beck, T.; Levine, R.
  • Finance and the sources of growth
    Beck, T.; Levine, R.; Loayza, N.
  • Financial development and economic growth: evidence from panel unit root and cointegration tests
    Christopoulos, K.D.; Tsions, G.E.
  • The saving retention coefficient in the long run and in the short run: evidence from panel data
    Coiteux, M.; Olivier, S.
  • Islamic banking and economic development
    Dahduli, M.S.
  • The lack of profit loss sharing in Islamic banking: management and control imbalances
    Dar, H.; Presley, J.
  • Non‐linearity between finance and growth
    Deidda, L.; Fattouh, B.
  • Does financial development cause economic growth? Time series evidence from 16 countries
    Demetriades, P.O.; Hussein, K.A.
  • Islamic Banking's Role in Economic Development: Future Outlook
    El‐Ghattis, N.
  • Financial dependence and growth revisited
    Fisman, R.; Love, I.
  • Islamic banking and economic growth: empirical evidence from Malaysia
    Furqani, H.; Mulyany, R.
  • Inference for unit roots in dynamic panels where the time dimension is fixed
    Harris, R.D.F.; Tzavalis, E.
  • Islamic banking and monetary policy: experience of Iran (1982‐2006)
    Hassani, M.
  • Analysis of FDI inflows to China from selected Asean countries: a panel cointegration approach
    Hussin, A.; Nor'Aznin, A.B.; Sallahuddin, H.
  • Testing for unit roots in heterogeneous panels
    Im, K.S.; Pesaran, M.H.; Shin, Y.
  • Finance and growth: Schumpeter might be right
    King, R.G.; Levine, R.
  • Energy consumption and GDP in developing countries: a cointegrated panel analysis
    Lee, C.‐C.
  • Unit root tests in panel data: asymptotic and finite sample properties
    Levine, A.; Lin, C.F.
  • Financial intermediation and growth: causality and causes
    Levine, R.; Loayza, N.; Beck, T.
  • Money and Capital in Economic Development
    McKinnon, R.I.
  • Unit Roots, Cointegration, and Structural Change
    Maddala, G.S.; Kim, I.‐M.
  • Islamic finance and economic growth: the Malaysian experience
    Majid, S.A.; Kassim, S.
  • Islamic banking: experiences in the Islamic Republic of Iran and Pakistan
    Mirakhor, A.; Khan, S.M.
  • The Economics of Money, Banking and Financial Markets
    Mishkin, F.S.
  • The overvaluation of purchasing power parity
    O'Connell, P.G.J.
  • Fully modified OLS for heterogenous cointegrated panels and the case of purchasing power parity
    Pedroni, P.
  • Critical values for cointegration tests in heterogeneous panels with multiple regressors
    Pedroni, P.
  • Fully‐modified OLS for heterogeneous cointegration panel
    Pedroni, P.
  • Purchasing power parity tests in cointegrated panels
    Pedroni, P.
  • Panel cointegration: asymptotic and finite samples properties of pooled time series tests with an application to the PPP hypothesis
    Pedroni, P.
  • Statistical inference in individual variables regression with I(1) process
    Phillips, P.C.B.; Hansen, B.E.
  • Financial dependence and growth
    Rajan, R.; Zingales, L.
  • Finance and the sources of growth at various stages of economic development
    Rioja, F.; Valev, N.
  • Financial Deepening in Economic Development
    Shaw, E.
  • Same financial development yet different economic growth why?
    Shen, C.‐H.; Lee, C.C.
  • The efficiency of Islamic banks: empirical evidence from the MENA and Asian countries Islamic banking sectors
    Sufian, F.; Mohamad, A.M.N.; Muhamed‐Zulkhibri, A.M.
  • A macroeconomic model of an interest‐free system
    Zangeneh, H.