Islamic financial investments and economic growth evidence from emerging economy, United Arab Emirates
Jan 04, 2018
Published in: International Journal of Economics and Business Research
The paper examines the role of Islamic banking investments in enhancing the emerging economic growth of United Arab Emirates (UAE). The study uses annual time series data to examine the relationship between the variables. Autoregressive distributed lag (ARDL) framework is utilised for co-integration along with error correction models. The findings indicate that in the long-term Islamic banks’ investments have contributed to the economic growth of UAE. It shows that when Islamic investments increase, the economic growth also increases in a positive way. Granger causality test results depict a positive and statistically significant relationship between economic growth and Islamic banks’ investments in both the short-run and in the long-run as well. It reveals that the causal relationship between Islamic banks’ investments and the economic growth of UAE is a supply-leading direction. The paper concludes that the United Arab Emirates Government should support the growth of Islamic banks since they approve their impacts on the UAE economy.