Dynamic causal relationship between Islamic banking and economic growth: Malaysian evidence

Islamic banking and finance have emerged as one component of a significant competitive and comprehensive market, where it is reliable with conventional financial development in term of economic contribution. As of today, Islamic banking accounts for a minimum of 11 percent growth in Malaysia economi...

Full description

Bibliographic Details
Main Authors:	Mohd. Israil, Ahmad Khaliq, Mohd Thas Thaker, Hassanudin
Format:	Article
Language:	English
Published:	European Research Centre for Islamic Finance 2017
Subjects:	H Social Sciences (General) HG1501 Banking HG3368 Islamic Banking and Finance HG4001 Financial management. Business finance. Corporation finance.
Online Access:	http://irep.iium.edu.my/75045/ http://irep.iium.edu.my/75045/ http://irep.iium.edu.my/75045/1/2211-8634-1-PB_2.pdf

id	iium-75045
recordtype	eprints
spelling	iium-750452019-10-30T02:05:37Z http://irep.iium.edu.my/75045/ Dynamic causal relationship between Islamic banking and economic growth: Malaysian evidence Mohd. Israil, Ahmad Khaliq Mohd Thas Thaker, Hassanudin H Social Sciences (General) HG1501 Banking HG3368 Islamic Banking and Finance HG4001 Financial management. Business finance. Corporation finance. Islamic banking and finance have emerged as one component of a significant competitive and comprehensive market, where it is reliable with conventional financial development in term of economic contribution. As of today, Islamic banking accounts for a minimum of 11 percent growth in Malaysia economic development and indirectly contributes to the global agenda of developing sustainable growth. Thus, this paper aims to empirically assess the dynamic contribution of Islamic banking towards economic growth in Malaysia based on selected variables, namely, real gross domestic product (GDP), total deposit, total financing, total assets and non-performing loan. The quarterly time – series data from (2007: Q1 – 2014: Q1) are used to uncover short–run and long–run relationship between real GDP and Islamic banking key financial indicators. Using a battery of time series econometric techniques, we document that there is robust evidence suggesting favourable result where Islamic banking does contribute towards economic growth in the long-run where the total deposit, total financing and total assets of Islamic banking have a positive relationship where the non-performing loan is found to have a negative relationship. To test the causality relationship of variables in the short-run, the Wald – test Granger Causality has been carried out and it shows that there is evidence of a bi-directional causality relationship between economic growth and total deposit of Islamic banks. In addition, the bidirectional relationship also exists between non-performing loan and total deposit of Islamic banks. However, the majority of the variables are found to be having unidirectional causality relationship among the variables. Overall, our conclusion state that Islamic banking and finance still act as one of the dominant key contributors to Malaysian economic development and growth. The results obtained in this paper are much more robust to alternative econometric specifications European Research Centre for Islamic Finance 2017 Article PeerReviewed application/pdf en http://irep.iium.edu.my/75045/1/2211-8634-1-PB_2.pdf Mohd. Israil, Ahmad Khaliq and Mohd Thas Thaker, Hassanudin (2017) Dynamic causal relationship between Islamic banking and economic growth: Malaysian evidence. European Journal of Islamic Finance (No 8 (2017): EJIF - European Journal of Islamic Finance, 8, 2017). pp. 1-10. E-ISSN 2421-2172 http://www.ojs.unito.it/index.php/EJIF/article/view/2211/pdf
repository_type	Digital Repository
institution_category	Local University
institution	International Islamic University Malaysia
building	IIUM Repository
collection	Online Access
language	English
topic	H Social Sciences (General) HG1501 Banking HG3368 Islamic Banking and Finance HG4001 Financial management. Business finance. Corporation finance.
spellingShingle	H Social Sciences (General) HG1501 Banking HG3368 Islamic Banking and Finance HG4001 Financial management. Business finance. Corporation finance. Mohd. Israil, Ahmad Khaliq Mohd Thas Thaker, Hassanudin Dynamic causal relationship between Islamic banking and economic growth: Malaysian evidence
description	Islamic banking and finance have emerged as one component of a significant competitive and comprehensive market, where it is reliable with conventional financial development in term of economic contribution. As of today, Islamic banking accounts for a minimum of 11 percent growth in Malaysia economic development and indirectly contributes to the global agenda of developing sustainable growth. Thus, this paper aims to empirically assess the dynamic contribution of Islamic banking towards economic growth in Malaysia based on selected variables, namely, real gross domestic product (GDP), total deposit, total financing, total assets and non-performing loan. The quarterly time – series data from (2007: Q1 – 2014: Q1) are used to uncover short–run and long–run relationship between real GDP and Islamic banking key financial indicators. Using a battery of time series econometric techniques, we document that there is robust evidence suggesting favourable result where Islamic banking does contribute towards economic growth in the long-run where the total deposit, total financing and total assets of Islamic banking have a positive relationship where the non-performing loan is found to have a negative relationship. To test the causality relationship of variables in the short-run, the Wald – test Granger Causality has been carried out and it shows that there is evidence of a bi-directional causality relationship between economic growth and total deposit of Islamic banks. In addition, the bidirectional relationship also exists between non-performing loan and total deposit of Islamic banks. However, the majority of the variables are found to be having unidirectional causality relationship among the variables. Overall, our conclusion state that Islamic banking and finance still act as one of the dominant key contributors to Malaysian economic development and growth. The results obtained in this paper are much more robust to alternative econometric specifications
format	Article
author	Mohd. Israil, Ahmad Khaliq Mohd Thas Thaker, Hassanudin
author_facet	Mohd. Israil, Ahmad Khaliq Mohd Thas Thaker, Hassanudin
author_sort	Mohd. Israil, Ahmad Khaliq
title	Dynamic causal relationship between Islamic banking and economic growth: Malaysian evidence
title_short	Dynamic causal relationship between Islamic banking and economic growth: Malaysian evidence
title_full	Dynamic causal relationship between Islamic banking and economic growth: Malaysian evidence
title_fullStr	Dynamic causal relationship between Islamic banking and economic growth: Malaysian evidence
title_full_unstemmed	Dynamic causal relationship between Islamic banking and economic growth: Malaysian evidence
title_sort	dynamic causal relationship between islamic banking and economic growth: malaysian evidence
publisher	European Research Centre for Islamic Finance
publishDate	2017
url	http://irep.iium.edu.my/75045/ http://irep.iium.edu.my/75045/ http://irep.iium.edu.my/75045/1/2211-8634-1-PB_2.pdf
first_indexed	2023-09-18T21:46:12Z
last_indexed	2023-09-18T21:46:12Z
_version_	1777413466696450048

Dynamic causal relationship between Islamic banking and economic growth: Malaysian evidence

Similar Items