Macroeconomic Effect Of Islamic Finance

Finance is an important factor affecting economic growth and stability.Islamic finance,as a new form of unconventional finance,is playing a more and more important role in the regional economy.This paper focuses on the macroeconomic effects of Islamic finance,from two aspects of growth and stability.The first chapter introduces the background,significance,methods and innovation of this paper.In the second chapter,literature review from five aspects:history,characteristics,differences in the development of Islamic finance and conventional finance motive,and compare with the macro economy,systematically summarizes the research results about Islamic finance.The core of this paper consists of three main parts as follows.The first work of this paper is the introduction of Islamic finance into the conventional financial intermediation and endogenous economic growth model under the premise that the proportion of Islamic finance is exogenous.At the same time in the model,the financial characteristics,Islamic financial intermediary religious characteristics and environment institutional quality characteristics respectively depict,constructed of Islamic finance and conventional finance dual financial system model,the relationship between the Islamic finance and economic growth.It is found that the relationship between the religious characteristics of Islamic finance and economic growth has a formal institutional quality threshold.When the environment institutional quality of Islamic finance is better,the religious characteristics can promote economic growth,and the formal system and the informal system are complementary.At the same time,the quality threshold of the formal institution also exists in the relationship between the financial characteristics of Islamic finance and the economic growth,and the threshold is increased with the increase of risk aversion.Further,through the comparative study found that,in the premise of long-term capital investment returns consistent,compared a single financial system with dual financial system containing Islamic finance and conventional finance only,economic growth rate of two is at least as good as,when the behavior of the risk aversion degree is low,the economic growth rate of dual financial system is higher.Second the research work of this paper mainly includes two aspects,first,in order to break the data constraints of the current Islamic financial macro perspective research,through manually search,identification and collection,constructed the "Islamic finance into the history database".In the narrow sense and the broad sense of two dimensions,has consulted and recorded the 198 countries and regions with Islamic finance,as well as the introduction of Islamic finance time.Second,using this own data and other public databases and employing the panel threshold regression model,this chapter does a empirical work to test the theoretical result obtained from the first work about the nonlinear relationship between the Islamic finance and economic growth.The study found that in the empirical research,Islamic finance and economic growth showed a significant the double threshold relationship,the effect of Islamic finance on economic growth has formal quality significant threshold effect.This results in four kinds of robustness test,is still very robust.Thus,through the second work of this paper,the theory of "better finance and more growth"in the conventional finance is also verified in the field of Islamic finance.The third research work of this paper is about the stability effect of Islamic finance.In this work,the Islamic financing mode is introduced to a dynamic stochastic general equilibrium model within financial shocks and technology shocks in the endogenous Islamic financial accounting,thereby relaxing the assumptions that exogenous setting of Islamic finance in first work.The model contains two sectors,facing the conventional financial debt financing,equity financing and Islamic finance,based on the original model and the conventional financial frictions,joined the Islamic financial friction.Through the construction of such a model,this chapter can solve the problem of Islamic finance,analyze the macroeconomic stability effect of Islamic finance under the influence of exogenous shocks,and the optimal proportion of Islamic finance.The third study found that in the stochastic model,when the economy in the face of technology shocks,output is consistent with the change and does not include the Islamic finance model,but the fluctuation of including Islamic finance model contains more,it is not an Islamic financial stability effect,the relative proportion of Islamic finance will first decreased and ultimately;in the face of conventional financial shocks,output changes is not consistent with the model without Islamic finance.Facing the negative impact of conventional finance,output will rise first and eventually return to the previous level,reflecting the effect of absorb and disperse the financial impact in Islamic financial stability effect.It is the positive stabilizing effect,the relative proportion of Islamic finance decreased again.In a deterministic model,when the conventional financial friction is bigger,the relative proportion of Islamic finance will increase,and the output will decrease but will eventually return to the original level;when the Islamic financial friction is bigger,the relative proportion of Islamic finance declined sharply after lifting output first decreased,and when enhance the effect of religion,the Islamic finance proportion will rise,output was increased and then decreased.Finally,the innovation of this paper is mainly reflected in the following four aspects:first,the innovation of theoretical modeling.The Islamic financial intermediary,Islamic finance pattern is introduced into the conventional finance and growth as well as dynamic stochastic general equilibrium model,then this paper analyzes the macroeconomic effects of Islamic finance by using the analysis tools of macro economics.This break distress in the theory of modeling Islamic finance in the past literature.Second,the breakthrough for the limitation in data.In this paper,the historical data base of Islamic finance is constructed by manual collection and arrangement,which breaks through the data constraints of Islamic finance in the previous research.Using this data,this paper tests the results of the theoretical model with the help of panel threshold model.Third,the innovation from the perspective of research.In the past,due to the constraints of data and theoretical modeling,Islamic finance research focused on the micro level.This paper breaks through the difficulties of data and modeling,through theoretical and empirical analysis,from a macro perspective on the issue of Islamic finance,enrich the study of Islamic financial issues.Fourth,the innovation of the research conclusion.On the one hand,the growth effect of Islamic finance in the past literature,both the theoretical and empirical research,the conclusions are not unified.Through theoretical and empirical findings,there is a nonlinear relationship with the formal institutional quality threshold between these two.This conclusion provides a uniform explanation for the previous studies;on the other hand,in the stabilizing effect of Islamic finance,the innovation of endogenous Islamic finance accounting,provides research support for the proportion of Islamic finance and conventional finance under the exogenous shocks.