Causality Relations Between Islamic Banking and Economic Growth

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There are various findings which show that in comparison to commercial banking, Islamic banking can more effectively fulfill financial mediatory functions and have important contributions to sustainable growth in countries where Islamic banking is applied. In this article, the roles of Islamic banking in growth and development are examined. The causality relationship between GDP and gross domestic capital formation with the total assets, funds and collected deposits of Islamic banks has been analyzed using panel causality tests for 19 Islamic countries from 2000 to 2013. The comprehensive examples used and the methods used in analyzing these examples differentiate this study from similar studies in this field. The findings from these analysis show that there is no direct and strong causality between variables concerning Islamic banks and GDP. However, it is seems more like a causality from collected deposits to placing the funds. Also, unidirectional causality is seen between islamic banking variables and gross domestic capital formation

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Islamic banking , growth , causality , panel causality tests

Journal Of Management an‎d Economics

502

Journal Of Management an‎d Economics