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The finance-growth nexus: is finance supply-leading or demand-following in islamic finance ? evidence from Malaysia

Norhaslina Ibrahim and Abul Masih

MPRA Paper from University Library of Munich, Germany

Abstract: This paper attempts to investigate the Granger-causality between Islamic banks and economic growth. Malaysia is taken as a case study. The methodology adopted is the standard time series techniques. The results tend to suggest that Islamic bank financing leads growth and other variables, being the most exogenous compared to others. In other words, the finance is supply-leading rather than demand-following in the context of Islamic finance in Malaysia. Thus, this finding has clear policy implications for the government to keep on enhancing Islamic banks’ development leading to a positive economic growth.

Keywords: GDP; Islamic Banks; Vector-Error Correction Model; Long Run Structural Modelling; Variance Decompositions (search for similar items in EconPapers)
JEL-codes: C22 C58 E44 (search for similar items in EconPapers)
Date: 2018-06-15
New Economics Papers: this item is included in nep-fdg, nep-isf, nep-mac and nep-sea
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