ISLAMIC FINANCE AND ECONOMIC GROWTH IN THE MENA REGION: WHAT CONTRIBUTIONS FROM THE QUALITY OF INSTITUTIONS?

Abstract

Since the financial crisis of 2009, debates are still open on the flaws of the conventional financial system as it is developed and applied internationally. Indeed, several works have revealed the importance of developing a so-called "ethical" finance such as Islamic finance in view of its supposedly "positive" impacts on the socio-economic development of countries. It is in this context that the present work examines the causality between Islamic finance, economic growth and institutional quality in a sample of MENA countries over a time series from 2000 to 2014. It finds that even after controlling for the effects of the determinants of economic growth and mainly those of institutional quality, Islamic financial development is found to be negatively correlated with economic growth.