Financial Development and Economic Growth in the MENA Region : What about Islamic Banking Development ?
By: Mohamed Goaied & Seifallah Sassi
EM Strasbourg Bussiness School
(Université de Strasbourg)
with
European Research Group
“Money, Banking & Finance”
Financial and Monetary European Integration Group
Workshop on Islamic Finance
in Strasbourg
What Islamic Finance does (not) change
March 17th,, 2010,, EM Strasbourg Business School
Abstract:
The purpose of this paper is to give firstly the theoretical advantages of Islamic banking and the main developmental characteristics of its financing modes and secondly; we assess empirically the relationship between the financial development and growth in some countries in the MENA region.
We try to check the specific effect of Islamic sector on the economic growth using the
amount of credit issued to the private sector by Islamic banks as measures of Islamic financial development. Thus, peculiarities of Islamic financial system will be detected.
The empirical study is conducted using an unbalanced panel data from 16 MENA region countries. We present evidence based on system GMM estimation of a dynamic panel model.
Our empirical results show a no significant relationship between banking and growth which reinforce the idea that banks don’t spur economic growth. Besides, we find for some specifications that the banks indicator is significantly negative associated with growth. Another finding is that Islamic banks don’t make the exception in the financial markets and show a weak relation with growth but it tends to act positively as theoretically demonstrated.
Finally, we demonstrated that the relationship between the financial development and growth is quite heterogeneous across MENA countries where the relation is negative for Petroleum Exporting MENA Countries and positive but not significant in MENA countries without oil manna.
JEL classification: E44; O16; C33
Keywords: Financial Development, Economic Growth, MENA Region, Islamic Banking.
source: http://www.em-strasbourg.eu/ems/ems-workshop-on-islamic-finance-33.html