Islamic bank contribution to Indonesian economic growth

Suhardi M. Anwar, Junaidi Junaidi, Salju Salju, Ready Wicaksono and Mispiyanti Mispiyanti

International Journal of Islamic and Middle Eastern Finance and Management, 2020, vol. 13, issue 3, 519-532

Abstract: Purpose - This paper aims to examine the short run and long run of Indonesia Islamic bank (IIB) contribution to economic growth over the periods 2009: Q1 – 2019: Q4. IIB is considered which supported by the largest Muslim population in the world. Deposits, financing and offices are proxy to highlight the relationship between Islamic banks and Indonesia's economic growth. Design/methodology/approach - Through cointegration analysis, autoregressive distributed lag (ARDL), vector error correction model (VECM), variance decompositions (VDCs) and impulse response functions (IRFs), this study investigates the Islamic bank and economic growth nexus. Findings - A significant relationship in the short-run and long-run between IIB deposits and offices and economic growth. There is evidence of a bidirectional relationship between the Islamic bank and economic growth. Social implications - In spite of their market share less than a conventional bank. The result proved than IB a prosperous sector and has a contribution to economic growth. This address regulator must have a dedicated unit to handle IIB legal cases should it go to the court for adjudication. Originality/value - The study role of Islamic banking contribution to economic growth in the context of Indonesia is limited. This paper is the first study that examines empirically the effect of Indonesian Islamic banks on economic growth measured by the amount of gross domestic product (GDP), financing, offices and deposits.

Keywords: Indonesia; Islamic banking (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:imefmp:imefm-02-2018-0071

DOI: 10.1108/IMEFM-02-2018-0071

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