| By: |
Chiad, Faycal;
GHERBI, Abdelhalim |
| Abstract: |
The aim of this research is to provide a suitable empirical framework for the
interaction between Islamic finance, financial stability and economic
development. Additionally, it is an attempt to empirically evaluate how the
levels of financial system stability and economic growth in an oil-rich nation
are affected by the financing provided by the Islamic banks. Employing fully
modified ordinary least squares (FMOLS) and quantile regression (QR) based on
quarterly data for the years 2013 to 2022. The paper explores strong evidence
that Islamic banking finance supports economic growth (coefficients ranging
from 0.14 to 0.22) and improves financial system stability, as indicated by
the coefficients ranging from 0.25 to 0.32. Moreover, the study highlights
that this positive relationship is negatively affected by inflation rates and
levels of economic policy uncertainty. Financial inclusion has an important
positive impact on both dependent variables, which reinforces this link.
Furthermore, oil rents in Saudi Arabia contributed to improving economic
development and supporting the financial sector's development to achieve
economic diversification aimed by Saudi Vision 2030. These findings confirm
the necessity of paying attention to developing Islamic banking and increasing
its market share by creating products and services that achieve economic
efficiency in accordance with suitable policies for making the financial
sector a strategic sector that supports economic development in KSA. |
| Keywords: |
Islamic Banks, Financial Stability, Economic Growth, Quantile Regression |
| JEL: |
C21 G21 G32 O47 |
| Date: |
2024 |
| URL: |
https://d.repec.org/n?u=RePEc:pra:mprapa:122409 |