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Islamic Financial Development And Economic Growth In Nigeria: A Bounds Testing Approach

Author

Listed:
  • Tasiu Tijjani Sabiu

    (Universiti Brunei Darussalam, Brunei Darussalam)

  • Muhamad Abduh

    (Universiti Brunei Darussalam, Brunei Darussalam)

Abstract

Using a bounds testing approach to the cointegration and error correction method developed within the autoregressive distributed lag (ARDL) framework, this paper analyses the short- and long-run dynamic relationships between Islamic financial development and economic growth in Nigeria. Quarterly time-series data (2012:1to 2019:3) are employed for the variables, together with non-interest bank financing to the private sector and real gross domestic product as indicators of Islamic financial development and economic growth respectively. The results indicate a significant short- and long-run relationship between Islamic financial development and economic growth. The relationship, however, is neither Schumpeter’s supply-leading nor Robinson’s demand-following type; rather, it appears to be bi-directional. In addition, empirical evidence is found that underscores the important role of Islamic bank financing in the economic performance of Nigeria. The paper recommends that improvement of the Islamic financial system in Nigeria may foster economic development and enhance welfare and poverty alleviation in the long run.

Suggested Citation

  • Tasiu Tijjani Sabiu & Muhamad Abduh, 2020. "Islamic Financial Development And Economic Growth In Nigeria: A Bounds Testing Approach," Journal of Islamic Monetary Economics and Finance, Bank Indonesia, vol. 6(3), pages 597-620, August.
    • Handle: RePEc:idn:jimfjn:v:6:y:2020:i:3f:p:597-620
    DOI: https://doi.org/10.21098/jimf.v6i3.1191
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    More about this item

    Keywords

    Economic growth; Islamic banking; ARDL;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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