Causality Relationship Between Banking & Industrial Production: Comparing Islamic & Conventional Banking in Turkey

Yıl 2020, Cilt: 7 Sayı: 2, 64 - 81, 21.09.2020

Etem Ergeç , Özer Selçuk

Öz

In Islamic finance, since money cannot be traded, the connection between the real economy and finance is expected to be much stronger compared to the conventional finance. In this paper, we analyse the interaction between Islamic banking and the real economy in Turkey in comparison with conventional banking. By using monthly data for the period 2010-2020 and employing Toda-Yamamoto approach, we investigate the causal relationships between six variables belonging to Islamic and conventional banking sector, and eight industrial production indexes. We find that the number of causal relationships between industrial production and Islamic banking are fewer compared to conventional banking and the directions of these relationships are mostly from the industry to banking. This means that the impact of the Islamic finance on Turkish industrial production is relatively limited, and the real economy has a strong influence on Islamic finance.
Keywords: Islamic Banking, Conventional Banking, Industrial Production 

Anahtar Kelimeler

islamic banking., conventional banking, industrial production

Destekleyen Kurum

Yok

Kaynakça

• Abduh, M., Chowdhury, N. T. (2012). “Does Islamic Banking Matter For Economic Growth In Bangladesh”, Journal of Islamic Economics, Banking and Finance, 8(3), 104-113.
• Abdul Manap, T. A., Abduh, M., & Omar, M. A. (2012). Islamic banking growth nexus: evidence from Toda-Yamamoto and Bootstrap Granger Causality Test. Journal of Islamic Finance, 176(813), 1-8.
• Asutay, M. (2012). Conceptualising and locating the social failure of Islamic finance: aspirations of Islamic moral economy vs the realities of Islamic finance. Asian and African Area Studies, 11 (2), 93-113.
• Asutay, M. (2013). Islamic moral economy as the foundation of Islamic finance. In V. Cattelan (ed.), Islamic Finance in Europe: Towards a Plural Financial System. Cheltenham: Edward Elgar Publishing.
• Asutay, M. & Ergec, E. H. (2013). Financial Development and Economic Performance Nexus in the Case of Islamic and Conventional Banks in Turkey: An Empirical Analysis. 9th International Conference on Islamic Economics and Finance, Istanbul.
• Atici, G. (2018). Islamic (Participation) banking and economic growth: empirical focus on Turkey. Asian Economic and Financial Review, 8(11), 1354-1364.
• Bougatef, K., Nakhli, M. S., & Mnari, O. (2020). The nexus between Islamic banking and industrial production. ISRA International Journal of Islamic Finance, 12(1), 103-114.
• Bozkurt, M., Altıntas, N., & Yardimcioglu, F. (2020). Katılım bankacılıgi ve konvansiyonel bankacılığın ekonomik büyüme üzerindeki etkileri: Türkiye üzerine bir inceleme, Uluslararası İslam Ekonomisi ve Finansı Araştırmaları Dergisi, 6(1), 95-114. Chapra, M.U. (1992). Islam and the Economic Challenge. International Institute of Islamic Thought, Hendon, VA.
• Chazi, A., Mirzaei, A., Zantout, Z., & Azad, A. S. (2020). Does the size of Islamic banking matter for industry growth: International evidence. Applied Economics, 52(4), 361-374.
• Dahduli, M. S. (2009). Islamic banking and economic development. SSRN Electronic Journal.
• Dickey, D. & Fuller, W. (1981). Likelihood ratio statistics for autogressive time series with a unit root. Econometrica, 49, 1052-1072.
• Ergec, E. H. & Kaytanci, B. G. (2017). Effects of Islamic Banking on employment: Turkish experience. In Handbook of Research on Unemployment and Labor Market Sustainability in the Era of Globalization. IGI Global.
• Errico, L. & Farahbaksh, M. (1998). “Islamic banking: Issues in prudential regulations and supervision” IMF Working Paper, No. 30, 1-32
• Furqani, H. & Mulyany, R. (2009). Islamic Banking and Economic Growth: Empirical Evidence from Malaysia, Journal of Economic Cooperation and Development, 30(2), 59-74.
• Granger, C.W.J. (1969). Investigating causal relations by econometric models and cross-spectral methods. Econometrica, 37(3), 424-438.
• IFSB (2019). Islamic Financial Services Industry Stability Report 2019. IFSB, Kuala Lumpur.
• Iqbal, Z. (1997). Islamic financial systems. Finance and Development, 34, 42-45.
• Imam P. & Kpodar, K. (2016) Islamic banking: Good for growth?, Economic Modelling, 2016, 59 (C), 387-401.
• Jawad A. & Christian K., 2019. "Islamic Banking And Economic Growth: Applying The Conventional Hypothesis," Journal of Islamic Monetary Economics and Finance, Bank Indonesia, 5(1), 1-26
• Jobarteh, M. & Ergec, E. H. (2017). Islamic finance development and economic growth: empirical evidence from Turkey. Turkish Journal of Islamic Economics, 4(1), 31-47.
• Kalayci, S. & Tekin, B. E. (2016). Interactions between economic growth, FDI and Islamic banking development in Turkey. International Journal of Business and Management, 11(8), 230-240.
• Khan, M.S. (1986). Islamic interest‐free banking: a theoretical analysis. Palgrave Macmillan Journals, 33(1), 1– 27.
• Khan, M. S. & Mirakhor, A. (1990). Islamic banking: experiences in the Islamic Republic of Iran and in Pakistan. Economic Development and Cultural Change, 38(2), 353-375.
• Kocak, E. (2018). İslami finans ve ekonomik büyüme: Türkiye üzerine ekonometrik bir uygulama. Erciyes Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, (51), 67-91.
• Mills, P. S. & Presley, J. R. (1999). Islamic finance: Theory and practice. Basingstoke, UK: Macmillan Press.
• Tabash, M.I. & Dhankar, R.S. (2014) Islamic Banking and Economic Growth — A cointegration Approach, Romanian Economic Journal, 2014, 17(53), 61-90.
• Tunay B. (2016). Causality Relations Between Islamic Banking and Economic Growth. Yonetim ve Ekonomi 23(2)
• Toda, H. Y. & Yamamoto, T. (1995). Statistical inference in vector autoregressions with possibly integrated processes. Journal of Econometrics, 66(1-2), 225-250.
• Yuksel, S. & Canoz, I. (2017). Does Islamic banking contribute to economic growth and industrial development in Turkey? Ikonomika, 2(1), 93-102.