Sukuk Market Development and Economic Growth: Panel Data Evidence
Mohammed Abdullah Khan, Sara Ahmed El-Sayed
This paper investigates the relationship between sukuk (Islamic bonds) market development and economic growth using panel data from 15 countries with significant Islamic finance sectors over the period 2010-2023. Employing dynamic panel GMM estimation techniques, we find robust evidence of a positive bidirectional relationship between sukuk market capitalization and GDP growth. Our results indicate that a 10% increase in sukuk market depth is associated with a 0.8% increase in long-term economic growth. We also document significant spillover effects, with sukuk issuance in one country positively influencing economic outcomes in neighboring markets. The findings have important policy implications for governments seeking to leverage Islamic capital markets as engines of sustainable economic development.