Is Islamic Banking Good for Growth?
April 28, 2015
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Summary
The rapid growth of Islamic banking has attracted much attention lately in the economic literature. At the same time, a mature body of the literature has shown that financial development is broadly conducive to economic growth, which raises the question as to whether a similar conclusion holds for Islamic banking. Against this backdrop, this paper investigates the relationship between Islamic banking development and economic growth in a sample of low and middle income countries, using data over the period 1990-2010. The results show that, notwithstanding its relatively small size compared to the economy and the overall size of the financial system, Islamic banking is positively associated with economic growth even after controlling for various determinants, including the level of financial depth. The results are robust across across different specifications, sample composition and time periods.
Subject: Banking, Commercial banks, Financial institutions, Financial markets, Financial sector development, Financial services, Government consumption, International trade, Islamic banking, Multilateral development institutions, National accounts, Terms of trade
Keywords: assets to GDP, banking assets, banking development, Commercial banks, conventional banking, economic growth, financial development, Financial sector development, Global, Government consumption, Islamic banking, private sector, real GDP, Terms of trade, WP
Pages:
33
Volume:
2015
DOI:
Issue:
081
Series:
Working Paper No. 2015/081
Stock No:
WPIEA2015081
ISBN:
9781475569285
ISSN:
1018-5941
