THE ROLE OF ISLAMIC FINANCE ON ECONOMIC GROWTH: AN EMPIRICAL ANALYSIS OF ISLAMIC COUNTRIES

Abstract

The purpose of the current study is to examine the role of Islamic finance on the economic growth of ten Islamic countries named as Pakistan, Saudi Arabia, Iraq, Iran, Turkey, Malaysia, Indonesia, United Arab Emirates, Bahrain, and Qatar. The present article has employed the Generalized Method of Moments (GMM) and Robust Standard Error approach to analyze the collected data. The findings revealed that Islamic financial indicators such as deposits and financing of Islamic banks along with the macroeconomics indicator, such as trade openness, have a positive association with economic growth, while inflation has a negative association with economic growth. These findings are providing the guidelines to the policymakers that they should divert their focus towards the Islamic financial aspect of economic growth.