Economic and institutional factors influencing economic growth with emphasis on Islamic financing instruments
hossein saveh shemshaki
1
(
Training Department of Management and Economics, Zanjan Branch, Islamic Azad University, Zanjan, Iran
)
mohamad dalman pour
2
(
Training Department of Management and Economics, Zanjan Branch, Islamic Azad University, Zanjan, Iran
)
Ashkan Rahimzadeh
3
(
Assistant professor , Faculty of Economics , Zanjan Azad University
)
Teymoor Mohammadi
4
(
Economics Department, Economics School, Allameh Tabataba'i University, Tehran, Iran.
)
Keywords: Estimated Weighted Least Squares (EGLS) Method, Economic Growth, Islamic Financing Instruments, Governance Quality Index,
Abstract :
One of the important issues in economic research is identifying the variables that affect economic growth. In Islamic economics, Islamic financial instruments (Sukuk) are recognized as one of the key components that distinguish Islamic economics from other economic systems. The main question is whether these instruments always have a positive effect on economic growth and what is the role of institutional factors in this? This article examines the question of what effect two main factors, namely Islamic financial instruments and institutional indicators, have on Iran's economic growth. For this purpose, economic data including capital and labor have been collected from the World Bank and information related to the issuance of Sukuk from the website (www.sukuk.ir). In this study, the weighted least squares (EGLS) model has been used to estimate the data. Also, governance indicators have been considered as representatives of institutional factors. The results of this study show that the issuance of Islamic financial instruments, improving governance indicators, gross fixed capital formation, and increasing the labor force have had positive and significant effects on Iran's economic growth.
1. Acemoglu, D. and J. A. Robinson (2012), “Why Nations Fail: The Origins of Power, Prosperity, and Poverty”, New York: Crown Business.
2. Acemoglu, Daron and James A. Robinson (2008), “The Role of Institutions in Growth and Development”. The International Bank for Reconstruction and Development, The World Bank, WP#10.
3. Acemoglu, Daron, Simon Johnson and James A. Robinson (2000), “The Colonial Origins of Comparative Development: American Economic Review, 91, No. 5 (December 2001): 1369-1401.
4. Acemoglu, Daron, Simon Johnson and James A. Robinson (2005), “Institutions as the Fundamental Cause of Long-Run Growth.” In Philippe Aghion and Steve Durlauf, eds, Handbook of Economic Growth.
5. Arooj Naz,S.& Gulzar,S. (2020). Impact of Islamic Finance on Economic Growth: An Empirical Analysis of Muslim Countries, The Singapore Economic Review, .Vol. 67, No. 01, pp. 245-265. DOI:10.1142/S0217590819420062
6. Asghar, N., Qureshi, D. S., & Nadeem, M. (2020). Institutional quality and economic growth: Panel ARDL analysis for selected developing economies of Asia. South Asian Studies, 30(2).
7. Echchabi, A., Aziz, H. A., & Idriss, U. (2018). The impact of Sukuk financing on economic growth: the case of GCC countries. International Journal of Financial Services Management, 9(1), 60-69. DOI:10.1504/IJFSM.2018.089920
8. Emara, N., & El Said, A. (2021). Financial inclusion and economic growth: The role of governance in selected MENA countries. International Review of Economics & Finance, 75, 34-54.DOI:10.1016/j.iref.2021.03.014
9. Emara, Noah & Chiu, I-Ming (2016) “The Impact of Government on Economic Growth: the Case of Middle east and North African Countries”, Topics in Middle eastern and African Economics, vol.18, issue No. 1, May 2016.
10. Evsey D. Domar, “Epantion and Employment” American Economic Review, XXXVII March 1947, P 34-55.
11. Fazeli, H., Najafpour, A., & Poureasmayil, M. (2018). The Impact of Islamic Finance on the Market of Selected Middle Eastern Countries. Islamic Economics Research Quarterly, Vol. 18, No. 70, Summer 2018, pp. 187-203. [In Persian]
12. Gharavi Sayed Farshid, Naghilou, A., & Rahimzadeh, A. (2023). The Effects of Islamic Bonds (Sukuk) on Economic Growth Based on a Stochastic Dynamic General Equilibrium (DSGE) Model. Financial Economics Journal, Vol. 17, No. 2, 2023, pp. 273-312. DOI: fed.2023.70219410.30495/ [In Persian]
13. Hassanzadeh, H., Qezelbash, M., Rostamipour, A., & Ghavam, M. H. (2021). Diagnosis of Banking Sukuk and Providing Solutions for Competitive Sukuk Market in Mobilizing Resources of Iran’s Banking System. Islamic Economics Research Quarterly, Vol. 21, No. 81, Spring 2021, pp. 157-189. [In Persian]
14. Jafari Samimi, A., Yahyazadeh Far, M., & Najafpour, A. (2016). The impact of Islamic finance on economic growth in selected countries. International Conference on Management and Economics in the 21st Century. Retrieved from https://sid.ir/paper/832938/fa [In Persian]
15. Khavarinezhad, S., Biancone, P., & Jafari-Sadeghi, V. (2021). Financing in the Islamic System and Sustainable Economic Development of Selected Islamic Countries. European Journal of Islamic Finance, (19), 18-23. DOI: 10.13135/2421-2172/6158
16. Ledhem, M.A. (2020), “Does Sukuk financing boost economic growth? Empirical evidence from Southeast Asia”, PSU Research Review, Vol. ahead-of-print No. ahead-of-print. DOI:10.1108/PRR-09-2020-0028
17. Ledhem, M.A. and Mekidiche, M. (2020), “Economic growth and financial performance of Islamic banks: a CAMELS approach”, Islamic Economic Studies, Vol. 28 No. 1, pp. 47-62. DOI:10.1108/IES-05-2020-0016.
18. Ledhem, M.A. and Mekidiche, M. (2021), “Islamic finance and economic growth nexus: an empirical evidence from Southeast Asia using dynamic panel one-step system GMM analysis”, Journal of Islamic Accounting and Business Research, Vol. 12 No. 8, pp. 1165-1180. DOI:10.1108/JIABR-03-2021-0107
19. Ledhem, M.A. and Mekidiche, M. (2021), “Islamic securities (Sukuk) and economic growth: New empirical investigation from Southeast Asia using non-parametric analysis of MCMC panel quantile regression”, Islamic Economic Studies, Vol. ahead-of-print No. ahead-of-print. DOI:10.1108/IES-06-2021-0020
20. Mohammadi, J., Ghasemzadeh Khosroshahi, A., & Khalili Aragi, M. (2022). The Impact of International Sukuk on Economic Growth of GCC Countries: Lessons for Iran's Economy. Islamic Economics Research Quarterly, Vol. 22, No. 87, Autumn 2022, pp. 187-159. [In Persian]
21. Naemi, M. , sohaili, K. and Karimi, M. S. (2019). Interaction Relationship Between Development of Islamic Financial Instruments (Sukuk) and Economic Growth. Islamic Economics, 19(73), 217-238. [In Persian]
22. Ramsey, F. P. (1928). “A Mathematical Theory of Saving”, The Economic Journal. 38 (152): 543–559.
23. Ridlo, M., Muthohar, A. M., & Masruhan, K. M. (2021). The impact of zakah, Islamic financing, sukuk and inflation on national economic growth with poverty as a moderation variable. Falah: Jurnal Ekonomi Syariah, 6(1), 17-29. DOI:10.22219/jes.v6i1.14993
24. Roy Harrod, “An Essay in Dynamic Theory” Economic Journal (XLIX), March 1939, p. 14-33.
25. Shahiki Tash, M., Molayi, S., & Dinarzehi, Kh. (2014). Investigating the Relationship between Economic Growth and Social Welfare Index in Iran Based on Bayesian Approach. Economic Growth and Development Research Quarterly, Vol. 4, No. 16, November 2014, pp. 41-52.DOR: 20.1001.1.22285954.1393.4.16.3.2 [In Persian]
26. Shakeri, M. , Jafari Samimi, A. and Karimi Moughari, Z. (2015). The Relationship between Institutional Variables and Economic Growth: Introducing a New Institutional Measure for Middle East and North Africa (MENA). Economic Growth and Development Research, 6(21), 106-93. [In Persian]
27. Smaoui H. and S. Nechi, “Does sukuk market development spur economic growth?,” Research in International Business and Finance, vol. 41, 2017, pp. 136-147. DOI: 10.1016/j.ribaf.2017.04.018
28. Smaoui, H., & Khawaja, M. (2017). The determinants of Sukuk market development. Emerging Markets Finance and Trade, 53(7), 1501-1518. DOI: 10.1080/1540496X.2016.1224175
29. Sobhi, S., Sameti, M., Ghabadi, S., & Sameti, M. (2022). Analyzing the Impact of Institutional Variables on Iran’s Macroeconomic Structure (Focusing on Economic Freedom Index). Development and Capital, Vol. 7, No. 1 (Consecutive 12), pp. 1-26 DOI: 2021.1908749.2415.10.30495 [In Persian]
30. Solow, Robert M. (February 1956). "A contribution to the theory of economic growth". Quarterly Journal of Economics. 70 (1): 65–94.
31. Taskhiri, M. (2007). The Sharia Foundations of Islamic Securities (Sukuk). Islamic Economics Research Quarterly, Vol. 7, No. 27, Autumn 2007, pp. 7-22. [In Persian]
32. Tohidi, M. & Yarmohammadi, R. (2017). Analytical Review of the Islamic Securities (Sukuk) Market in Iran and the World. Tehran: Securities and Exchange Organization, Research, Development, and Islamic Studies Center, Markets and Financial Instruments Group. [In Persian]
33. World Bank, (2003) “Better Governance for Development in the Middle East and North Africa: Enhancing Inclusiveness and Accountability”, http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2003/11/06/000090341_20031106135835/Rendered/PDF/271460PAPER0Be1ance0for0development.pdf.
34. Yildirim, S., Yildirim, D.C. and Diboglu, P. (2020), “Does Sukuk market development promote economic growth?”, PSU Research Review, Vol. 4 No. 3, pp. 209-218. DOI:10.1108/PRR-03-2020-0011.
35. Yuliani, I., Qizam, I., Nugroho, A., & Mu'arrif, Z. I. (2022). The impact of Sukuk on the country’s economic growth with country governance as a moderating variable. Al-Uqud: Journal of Islamic Economics, 6(1), 112-123.DOI: 10.26740/aluqud.v6n1.p112-123
36. Zulkhibri, M. (2015). A synthesis of theoretical and empirical research on sukuk. Borsa Istanbul Review, 15(4), 237-248.