ISLAMIC FINANCIAL DEVELOPMENT AND ECONOMIC GROWTH IN NIGERIA: A BOUNDS TESTING APPROACH

Tasiu Tijjani Sabiu () and Muhamad Abduh ()
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Tasiu Tijjani Sabiu: Universiti Brunei Darussalam, Brunei Darussalam
Muhamad Abduh: Universiti Brunei Darussalam, Brunei Darussalam

Journal of Islamic Monetary Economics and Finance, 2020, vol. 6, issue 3, 597-620

Abstract: Using a bounds testing approach to the cointegration and error correction method developed within the autoregressive distributed lag (ARDL) framework, this paper analyses the short- and long-run dynamic relationships between Islamic financial development and economic growth in Nigeria. Quarterly time-series data (2012:1to 2019:3) are employed for the variables, together with non-interest bank financing to the private sector and real gross domestic product as indicators of Islamic financial development and economic growth respectively. The results indicate a significant short- and long-run relationship between Islamic financial development and economic growth. The relationship, however, is neither Schumpeter’s supply-leading nor Robinson’s demand-following type; rather, it appears to be bi-directional. In addition, empirical evidence is found that underscores the important role of Islamic bank financing in the economic performance of Nigeria. The paper recommends that improvement of the Islamic financial system in Nigeria may foster economic development and enhance welfare and poverty alleviation in the long run.

Keywords: Economic growth; Islamic banking; ARDL (search for similar items in EconPapers)
JEL-codes: C22 E44 G21 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:idn:jimfjn:v:6:y:2020:i:3f:p:597-620

DOI: 10.21098/jimf.v6i3.1191

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