An Empirical Analysis of the Equilibrium Between Islamic Finance and the Economy: An Insight from the Johansen Cointegration Test

Abstract

The study tests whether Sukuk/Islamic bonds and the economy are in a dynamic equilibrium using quarterly data from GCC countries and Türkiye. The Johansen cointegration technique is adopted. Also, we have applied the LRSM to check whether the long relation is consistent with the a priori information. Additionally, to enhance the robustness of the findings, a Bayesian approach was employed. It has been revealed that the economy and Sukuk are in a dynamic equilibrium. As such, a spurious relation is ruled out. This implies that the coefficient of the cointegrating vectors encompasses the necessary information of whether the previous values can have an impact on their own present value or on another variable in the long run. Moreover, owing to "LRSM" subjected to exactly and over-identifying restrictions, the findings further revealed that the long-run coefficients significantly enter the cointegrating vector, hence aligning with theoretical expectations; as such, we ascertain that the estimated model is both data and theory-consistent. In terms of directional and statistical significance, the LRSM’ s finding is consistent with the Bayesian regression results. Therefore, evidence of cointegration is crucial for investors seeking to diversify their portfolios into the Sukuk markets. As such, a strong GDP may signal a potential for higher returns on Sukuk investments.

Keywords

• Islamic Finance
• Sukuk
• Johansen Cointegration
• Economy
• GDP
• Long Run Structural Modeling

İslami Finansman ile Ekonomi Arasındaki Dengeye İlişkin Ampirik Bir Analiz: Johansen Eşbütünleşme Testi’nden Çıkarılan Sonuçlar

Öz

Bu çalışma, Körfez Arap Ülkeleri İş Birliği Konseyi (KİK) ülkeleri ve Türkiye ’den alınan çeyreklik verileri kullanarak, Sukuk/İslami tahviller ile ekonominin dinamik bir dengede olup olmadığını test etmektedir. Çalışmada Johansen eşbütünleşme tekniği benimsenmiştir. Ayrıca, uzun dönemli ilişkinin teorik ön bilgilerle tutarlı olup olmadığını kontrol etmek amacıyla LRSM uygulanmıştır. Buna ek olarak, bulguların sağlamlığını artırmak için Bayesyen bir yaklaşım istihdam edilmiştir. Analiz sonucunda, ekonomi ve Sukuk piyasasının dinamik bir dengede olduğu ortaya konulmuştur. Bu durum, değişkenler arasındaki ilişkinin sahte olma ihtimalini ortadan kaldırmaktadır. Bu sonuç, eşbütünleşme vektörlerinin katsayılarının geçmiş değerlerin, değişkenlerin kendi mevcut değerleri veya uzun dönemde başka bir değişken üzerinde etkisi olup olmayacağına dair gerekli bilgileri kapsadığı anlamına gelmektedir. Dahası, tam tanımlanmış ve aşırı tanımlanmış kısıtlamalara tabi tutulan LRSM analizi sayesinde, uzun dönem katsayılarının eşbütünleşme vektörüne anlamlı bir şekilde dahil olduğu ve böylece teorik beklentilerle örtüştüğü saptanmıştır; bu bakımdan, tahmin edilen modelin hem veriyle hem de teoriyle tutarlı olduğu teyit edilmiştir. Yönsel ve istatistiksel anlamlılık açısından LRSM bulguları, Bayesyen regresyon sonuçları ile tutarlılık göstermektedir. Dolayısıyla, eşbütünleşmeye dair kanıtlar portföylerini Sukuk piyasalarına çeşitlendirmek isteyen yatırımcılar için büyük önem arz etmektedir. Bu bağlamda, güçlü bir GSYH, Sukuk yatırımlarında daha yüksek getiri potansiyeli için bir sinyal niteliği taşıyabilir.

Anahtar Kelimeler

• Sukuk
• İslami Finans
• VECM
• Johansen Eşbütünleşme Tekniği
• LRSM
• GSYH

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