The Impact of the Islamic System on Economic and Social Factors: A Macroeconomic Uncertainty Context

Mohamed Sadok Gassouma and Adel Benhamed ()
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Mohamed Sadok Gassouma: Higher Institute of Theology of Tunis, Department of Islamic Law, Economics and Finance, Ez-Zitouna University, Tunis 1008, Tunisia
Adel Benhamed: Business School, King Faisal University, Al-Ahsa 31982, Saudi Arabia

Economies, 2023, vol. 11, issue 12, 1-17

Abstract: This paper examines the effects of Islamic economic and social systems within a democratic environment on the causal relationships among uncertainty, informal economy, corruption, and economic growth. For this purpose, we considered a set of Middle East/North Africa MENA countries considered to be in economic difficulty and undergoing the democratic transition process (Tunisia, Algeria, Egypt, Libya, Yemen, and Iraq) for the period of 2000–2018. Our contribution is to use the social index that measures the degree of Islamicity in each country in terms of economic and political matters. We examine the effects of Islamicity and democracy on uncertainty, informal economy, corruption, and economic growth using a vector autoregression (VAR) model. Our empirical findings show that, if a theoretical Islamic system is applied in practice, it must be accompanied by a democratic regime to effectively mitigate uncertainty, informal economy, and corruption and contribute to economic growth. Democracy is a necessary component for achieving an optimal level of Islamicity.

Keywords: uncertainty index; democracy; economic growth; Islamic indices; corruption (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2023
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