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Dynamics of Islamic financing in Malaysia: causality and innovation accounting

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Date
2011
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Abstract
The article evaluates dynamic interactions between Islamic financing and macroeconomic and financial variables for Malaysia using the Toda-Yamamoto (1995) causality test and innovation accounting approach. The results suggest strong causal influences of interest rate on Islamic financing but insignificant causal relations from real stock prices or real production to Islamic financing. Thus, while the results suggest that Islamic financing in Malaysia is resilient to boom/bust cycles of the stock market or fluctuations in real activity, Islamic banks under a dual-banking environment are not spared from fluctuations in interest rate or monetary conditions of the country.
Keywords
Islamic financing , Causality , Innovation accounting , Malaysia
Citation
Ibrahim, M. H. & Sukmana, R. (2011). Dynamics of Islamic financing in Malaysia: causality and innovation accounting. Journal of Asia-Pacific Business, 12 (1), pp. 4-19.
Publisher
Routledge

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