nep-isf New Economics Papers
on Islamic Finance
Issue of 2020‒03‒02
one paper chosen by

  1. The finance-growth nexus: is finance supply-leading or demand-following in islamic finance ? evidence from Malaysia By Ibrahim, Norhaslina; Masih, Mansur

  1. By: Ibrahim, Norhaslina; Masih, Mansur
    Abstract: This paper attempts to investigate the Granger-causality between Islamic banks and economic growth. Malaysia is taken as a case study. The methodology adopted is the standard time series techniques. The results tend to suggest that Islamic bank financing leads growth and other variables, being the most exogenous compared to others. In other words, the finance is supply-leading rather than demand-following in the context of Islamic finance in Malaysia. Thus, this finding has clear policy implications for the government to keep on enhancing Islamic banks’ development leading to a positive economic growth.
    Keywords: GDP, Islamic Banks, Vector-Error Correction Model, Long Run Structural Modelling, Variance Decompositions
    JEL: C22 C58 E44
    Date: 2018–06–15

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