Does Sukuk Sector Stimulate Economic Growth? Empirical Evidence from MENA and Southeast Asia Region

Abstract

The main objective of this paper is to examine the impact of Sukuk sector development on economic growth. This study focuses on a sample comprising some Sukuk-issuing countries in the MENA and Southeast Asia regions over the period 1995-2015. To address potential problems of endogeneity and simultaneity, we employ the generalized method of moments (GMM) system proposed by Blundell and Bond (1998). The obtained results indicate that the development of the Sukuk market significantly affects economic growth, even after controlling various measures of the financial market development and classical determinants of economic growth. Furthermore, the findings suggest that the financial and service sectors have a greater impact on economic growth compared to other sectors. Additionally, there is a significant difference observed between the various sectors of Sukuk in the two regions.