Islamic Financial Development and Economic Growth of Emerging Economy of Pakistan; a Panel Data Approach

Abstract

The purpose of this study is to investigate the dynamic interactions between five pure Islamic banks of Pakistan and economic growth by using Panel ARDL method over the period of 2006-2016. The study elaborates strong confirmation and advocates the significant positive long-run relationship with economic growth. However, in short-run, each bank has individual significant positive relationship with economic growth in its individual capacity. The findings of this study are encouraging and signify a considerable contribution to recognize how pure Islamic banks activities translated into economic performance of the country. Although prudential regulations of State Bank of Pakistan are quite sound and their legislative structure and policy framing is also equally good but they are required to enhance the number of pure Islamic banks in the country for offering multiple options to clientele in order to promote Islamic economic activities in the country to make Pakistan more prosperous.

Keywords

• Islamic Banks
• Islamic Financing
• Islamic Banks Investments
• Islamic banks Innovation
• Economic Growth
• ARDL