Murabahah Versus Interest Rate, the Equilibrium Relationship with Macroeconomic Variables in Jordanian Economy: An ARDL Approach

Abstract

In the first decade of the 21st century, the world witnessed another global financial crisis, which was inaugurated in late last quarter of 2007. Its impacts that still can be seen everywhere until now has left severe impacts on the macroeconomic variables such as, Gross Domestic Product, Unemployment Rate, Inflation Rate, and Exchange Rate. This paper attempts to investigate the effects of MURABAHAH and interest rate on the global financial crisis 2008. Effects of MURABAHAH and IR on the financial crisis through its known and obvious indications or magnifications were intensely explained in this study. Six variables were targeted in this study, that are, Murabahah Rate, Interest Rate, Inflation Rate, Unemployment Rate, Exchange Rate and Gross Domestic Product. The data for this study was collected from Jordanian statistics department, Central Bank of Jordan, World Bank, and Jordanian Islamic Bank. The time series of 1984- 2012 was chosen as the study duration. The outcome of this paper show that the effect of macroeconomic variables on Murabahah is acceptable compare with its impact on Interest rate and Murabahah can make equilibrium faster than interest rate. However, the police makers in Jordan must pay more attention to the Islamic finance as an alternative of conventional finance.