Islamic Banking and Economic Growth: Evidence From Asia

Abstract

This paper investigates the short- and long-run causality relationship between Islamic banking and the economic growth. The main goal of this paper is to examine the relationship between the economic growth and Islamic banking. The dataset used covers the Asia countries over the period of 1980-2009. The unit root test Im, Pesaran, and Shin (IPS) (2003) confirms that all of the variables that the authors use in the equation below are stationary. The empirical result of the Granger causality test shows a bidirectional relationship between Islamic banking and the economic growth and also a bidirectional relationship between the economic growth and export.