Islamic banking and economic growth: the Indonesian experience
Purpose – The purpose of this paper is to examine the short-run and the long-run relationships between Islamic banking development and economic growth in the case of Indonesia. Design/methodology/approach – Using quarterly data (2003:1-2010:2), this paper utilizes the bound testing approach o...
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| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Emerald Group Publishing
2012
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| Subjects: | |
| Online Access: | http://irep.iium.edu.my/23696/1/Islamic_banking_%26_growth%2C_Indonesia.pdf http://irep.iium.edu.my/23696/ http://www.emeraldinsight.com/journals.htm?articleid=17024832 |
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| Institution: | Universiti Islam Antarabangsa Malaysia |
| Language: | English |
| Summary: | Purpose –
The purpose of this paper is to examine the short-run and the long-run relationships between Islamic banking development and economic growth in the case of Indonesia.
Design/methodology/approach –
Using quarterly data (2003:1-2010:2), this paper utilizes the bound testing approach of cointegration and error correction models, developed within an autoregressive distributed lag (ARDL) framework.
Findings –
The results demonstrate a significant relationship in short-run and long-run periods between Islamic financial development and economic growth. The relationship, however, is neither Schumpeter’s supply-leading nor Robinson’s demand-following. It appears to be bi-directional relationship.
Originality/value –
This paper uses empirical evidence to show the role of Islamic banks’ financing towards economic performance of a country.To the best of the authors’ knowledge, the study on the role of Islamic banking development towards economic growth is limited, particularly in the context of Indonesia.
Keywords: Indonesia, Islam, Banking, Islamic banking, Islamic finance, Economic growth |
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