Islamic banking and economic growth: the Indonesian experience

  • Muhamad Abduh, Mohd Azmi Omar
  • International Journal of Islamic and Middle Eastern Finance and Management, March 2012, Emerald
  • DOI: 10.1108/17538391211216811

The study about the relationships between Islamic banking and economic growth.

What is it about?

Using quarterly data (2003:1-2010:2), this paper utilizes the bound testing approach of cointegration and error correction models, developed within an autoregressive distributed lag (ARDL) framework.

Why is it important?

The results demonstrate a significant relationship in short-run and long-run periods between Islamic financial development and economic growth. The relationship, however, is neither Schumpeter’s supply-leading nor Robinson’s demand-following. It appears to be bi-directional relationship.

Perspectives

Dr Muhamad Abduh
Universiti Brunei Darussalam

This paper uses empirical evidence to show the role of Islamic banks’ financing towards economic performance of a country.To the best of the authors’ knowledge, the study on the role of Islamic banking development towards economic growth is limited, particularly in the context of Indonesia.

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http://dx.doi.org/10.1108/17538391211216811

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