Abstract:

In this study, the causation relationship between financial development and economic growth in the Islamic banking feature was analyzed for Central Asian countries involved in emerging markets for the period 2010-2020 with the Toda Yamamoto Causation test and Frequency Area Causation Test in the case of Kazakhstan. As a gauge of financial development, was used funds given for business customers in Islamic banks and quarterly data for Gross Domestic Product (GDP). For analysis unit root tests, allowing for structural fractures was used. The causation relationship between Islamic banking development and economic growth has been tested by the Toda Yamamoto causation test, taking into account the specifics of series after determination of stasis. In the context of determining the existence of transient and lasting effects of causation, the Frequency Area Causality test, developed by Breitung and Candelon (2006), was made short, medium and long term separation, providing causation analysis. As a result of the analysis, one-way and persistent causation has been identified from economic growth to Islamic banking. Policy recommendations have been made through these results that validate the demand-tracked hypothesis.

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