Finance – growth nexus: evidence from systemically important Islamic finance countries

What is it about?

This paper examines the relationship between financial development and economic growth in countries with systemically important Islamic finance. For this purpose, we use several estimation methods using the sample of 23 countries and covering the period of 2000-2019. Our findings show that financial development – at least as understood from the literature so far – may not be a significant factor in determining the economic growth of a country as financial development proxies are either insignificant or significantly negative. Perhaps, there is a need to find better measures for financial development as the most used ones (private credit, liquid liabilities, and broad money) are shown to be insignificant. These results are robust across different estimation specifications and methods used.

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