Abstract:

The rapid growth of Islamic banking has attracted much attention lately in the economic literature. The main goal of this paper is to investigate the relationship between the Islamic banking, economic growth and innovation using data for the five Gulf Arab States (Bahrain, United Arab Emirates, Kuwait, Qatar and Saudi Arabia) in the period of 2001–2015. In the empirical analysis where the panel data method is used, unit root and co-integration tests were applied to the variables. It is postulated that according to the test findings, economic growth is co-integrated with Islamic banking and patent application. Long run co-integration coefficients of the variables were analysed throughout the panel using the method of Panel Dynamic Ordinary Least Squares (PDOLS). The conclusion of the empirical study indicates that Islamic banking funds and innovation in chosen Gulf Arab states have positive and significant relations with economic growth. 

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