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Cited by 136Islamic Finance and Banking StudiesEconomic Growth and DevelopmentMonetary Policy and Economic Impact

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Financial development, Islamic finance and economic growth: evidence of the UAE

Zarrouk, Hajer, El Ghak, Teheni, Abu Al Haija, Elias·2017·Journal of Islamic Accounting and Business Research
DOI 10.1108/jiabr-05-2015-0020
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Abstract

Purpose: Does Islamic finance affect economic growth? The empirical literature in this area seems to be in early stages and the results are often mixed and inconclusive. This paper aims to examine the causality between financial development in general, Islamic finance in particular and real economic growth in the United Arab Emirates (UAE). Design/methodology/approach: Using time series data from 1990 to 2012, a bivariate vector autoregressive model was used to document the financial development-Islamic finance-growth causal nexus and to forecast growth under various scenarios. A composite indicator, as a proxy for financial development, was determined using a non-parametric approach: data envelopment analysis. Findings: The direction of causality runs from financial development to economic growth and the reverse causality does not drive this relationship; however, the real gross domestic product (GDP) causes Islamic financial development with no reverse effect. Furthermore, the forecasting results indicate that the past relation has been a proxy for the future where financial development leads to better progress in real economic activity. This will likely continue to stimulate the development of Islamic finance. Research limitations/implications: Because the financial markets in the UAE were established in 2000, this study ignored Islamic bonds and equity product. The value of the S ukuk listed on Dubai’s exchanges is around US$36.75bn (Thomson Reuters, 2015), reinforcing Dubai’s position as an international center for Sukuk activity. Among the most important tools of the Islamic financial sector, Sukuk deserves a closer empirical study. This can set the agenda for future work. Practical implications: The financial sector appears to be one of the main drivers of real economic activity. However, more effort in the area of Islamic finance is needed to promote Shari’ah-compliant economic activities and thus better contribute toward making Dubai-UAE the capital of the Islamic economy. Originality/value: A new indicator was used to evaluate the financial strength of the UAE and analyze its effect on economic development. In addition, as one of UAE’ emirates, Dubai declared its vision in 2013 to become the “capital of the Islamic economy”, this study analyzed the finance, Islamic finance and growth relations over the period 2013-2022.

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Metadata

Authors
Zarrouk, H., El Ghak, T., & Abu Al Haija, E.
Affiliations
Tunis El Manar University (TN)
ORCID
Zarrouk, Hajer
Venue
Journal of Islamic Accounting and Business Research
Publisher
Emerald
Published
2017-02-13
Volume
8
Issue
1
Pages
2-22
ISSN
1759-0817 (ISSN-L)
DOI
10.1108/jiabr-05-2015-0020
OpenAlex
W2579450345
Cited by
136
References
2
Citations by year
2026: 12 · 2025: 19 · 2024: 29 · 2023: 26 · 2022: 10 · 2021: 20 · 2020: 11 · 2019: 5 · 2018: 2 · 2017: 2
FWCI
15.40
Type
journal article
Language
en
Open access
closed
Licence
www.emerald.com/insight/site-policies (tdm)
Locations
  • Journal of Islamic accounting and business research (publishedVersion)
  • RePEc: Research Papers in Economics (submittedVersion)
Funders
World Bank Group
Topics
  • Social Sciences › Business, Management and Accounting › Accounting › Islamic Finance and Banking Studies
  • Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Economic Growth and Development
  • Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Monetary Policy and Economic Impact
Keywords
Islamic finance, financial development, economic growth, causality, United Arab Emirates, data envelopment analysis, sukuk, growth prediction, Dubai

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