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Does the growth of islamic bank financing depend on stock market growth? evidence from Malaysia

Author

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  • Cheah, Chee Keong
  • Masih, Mansur

Abstract

The stability of Islamic banks compared to that of the conventional banks during the Asian Financial crisis of 1997-1998 facilitated the growth of Islamic banks. The Islamic banks had a significant growth since then. This paper is focused on identifying the major macroeconomic drivers of Islamic banks. Malaysia is used as a case study. The standard time series techniques are employed with the cointegration (i.e., the long run theoretical relationship) of the variables tested through the ARDL method which takes care of the limitations of Johansen and Engle-Granger methods. The findings based on VECM and VDCs tend to indicate that Islamic financing was driven by the stock market growth followed by the bank lending rate and industrial production. The policy makers are urged to keep an eye on maintaining the stability of the stock markets with a view to enhancing the stability and growth of Islamic financing.

Suggested Citation

  • Cheah, Chee Keong & Masih, Mansur, 2017. "Does the growth of islamic bank financing depend on stock market growth? evidence from Malaysia," MPRA Paper 106192, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:106192
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    More about this item

    Keywords

    Islamic bank financing; stock markets; ARDL; VECM; VDCs ; Malaysia;
    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
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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