The relationship between Sukuk market and economic growth: panel causality analysis

Abstract

Purpose- The aim of this study is to examine the relationship between countries' Sukuk market development and economic growth. Panel VAR analysis was applied to investigate whether there is a realtionship between these two factors. Methodology- In the analysis of the research, quarterly data of 2014Q1-2019Q2 period is used. Turkey, Kuwait, Malaysia, Pakistan, Saudi Arabian, Sudan, United Arab and Indonesia countries are included in the analysis. In the study, Dumitrescu Hurlin panel causality test was applied as a method. Sukuk and economic growth rates of the countries are used as a variable. Findings- According to the findings obtained as a result of the analysis, a one-way causality relationship is observed from the economic growth to the Sukuk growth rate. Conclusion- When the Sukuk and economic growth results are analyzed, there is no causality relationship from Sukuk growth rate to economic growth. However, a causality relationship has been identified from economic growth to Sukuk growth rate. When the economic growth variance decomposition results are analyzed, in the first period, the change in economic growth is fully explained by itself. When the Sukuk variance decomposition results are analyzed, 99.6% of the change in Sukuk in the first period is announced by itself. Keywords: Economic growth, Sukuk, panel causality, response analysis