Modeling the impact of Islamic finance on macroeconomic variables in Sudan

This research paper aims at modeling the impact of Islamic finance on some macroeconomic variables in Sudan during the period (2000 - 2014),  using standard models to measure the impact of the Islamic financing formulas of musharakah, mudarabah, salam, murabahah, leasing, istisna' and musasaqat, as well as "Shahama" certificates of government participation on gross domestic product (GDP). It also examines it impact on accumulation of fixed capital, family consumption, money supply, inflation, trade balance, and unemployment. In order to precisely describe the phenomena and economic behavior being studied, and in order to determine the real effects of the variables, the proposed economic model was estimated on the basis of a system of equations instead of single-equation economic models. The regular three-stage least squares method, which is a combination of the two-stage least squares method and the generalized placement method, was used. One of the most important results of the study is that the Islamic financing formulas clearly affect the control of liquidity management in order to achieve economic growth by focusing on financing through mudarabah, salam, and the other forms. Also, the accumulation of fixed capital can be promoted through murabahah, musharakah, mudarabah and other forms (leasing, istisna' and musaqat). The mudarabah and salam formulas contribute to controlling inflation while the murabahah and musharakah modes contribute to raising the level of consumption and aggregate demand. They also increase the surplus in the trade balance through export financing operations in addition to the competitive advantages granted to the local product through their effect on the exchange rate. As for Shahama government participation certificates, they had an impact on most economic variables and can be used to manage cash liquidity and, more importantly, to cover public expenditures and remedy the budget deficit.