Islamic bank contribution to Indonesian economic growth
International Journal of Islamic and Middle Eastern Finance and Management
ISSN: 1753-8394
Article publication date: 23 June 2020
Issue publication date: 7 July 2020
Abstract
Purpose
This paper aims to examine the short run and long run of Indonesia Islamic bank (IIB) contribution to economic growth over the periods 2009: Q1 – 2019: Q4. IIB is considered which supported by the largest Muslim population in the world. Deposits, financing and offices are proxy to highlight the relationship between Islamic banks and Indonesia's economic growth.
Design/methodology/approach
Through cointegration analysis, autoregressive distributed lag (ARDL), vector error correction model (VECM), variance decompositions (VDCs) and impulse response functions (IRFs), this study investigates the Islamic bank and economic growth nexus.
Findings
A significant relationship in the short-run and long-run between IIB deposits and offices and economic growth. There is evidence of a bidirectional relationship between the Islamic bank and economic growth.
Social implications
In spite of their market share less than a conventional bank. The result proved than IB a prosperous sector and has a contribution to economic growth. This address regulator must have a dedicated unit to handle IIB legal cases should it go to the court for adjudication.
Originality/value
The study role of Islamic banking contribution to economic growth in the context of Indonesia is limited. This paper is the first study that examines empirically the effect of Indonesian Islamic banks on economic growth measured by the amount of gross domestic product (GDP), financing, offices and deposits.
Keywords
Acknowledgements
The authors would like to thank the referees of the journal for providing helpful comments on the earlier draft of the paper. However, the authors bear sole responsibility for any errors.
Declaration of conflicting interests: The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding: The author(s) received no financial support for the research, author-ship, and/or publication of this article.
Citation
M. Anwar, S., Junaidi, J., Salju, S., Wicaksono, R. and Mispiyanti, M. (2020), "Islamic bank contribution to Indonesian economic growth", International Journal of Islamic and Middle Eastern Finance and Management, Vol. 13 No. 3, pp. 519-532. https://doi.org/10.1108/IMEFM-02-2018-0071
Publisher
:Emerald Publishing Limited
Copyright © 2020, Emerald Publishing Limited