Does Islamic Finance Development Support Economic Growth?: A New Overlook

Authors

1 Tarsus University Vocational School, Tarsus University, Tarsus/Mersin, Turkey.

2 Department of International Trade and Logistics, Faculty of Applied Sciences Tarsus, Tarsus University, Tarsus/Mersin, Turkey.

3 Department of Economics, Ataturk University, Erzurum, Turkey

Abstract

In the study, the relationship between the development of Islamic finance and economic growth in 40 countries where the share of the value of Islamic finance assets in total financial assets is determined to be the highest in the world is examined. Econometric models, which are defined based on the extension of the Cobb-Douglas production function, are analysed for the period 2012-2018 within the scope of panel data methodology that takes into account cross-section dependence. According to the results of the analysis made on two different models in which the total market value of Islamic finance assets is measured as flow and stock variables: Islamic finance development affects economic growth in a positive and statistically significant way in the 40 countries that make up the sample. This result reveals that there may be practices for the development of Islamic financial markets among the policies that countries can follow in order to achieve stable and sustainable economic growth.

Keywords

Iranian Economic Review

Articles in Press, Accepted Manuscript
Available Online from 27 November 2022

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