Coexistence of Conventional and Islamic Banking: The Impact on Growth and Trade

This thesis aims at understanding the impact of Islamic banking development on economic growth and international trade in countries with a dual banking system. For this purpose we use a sample of twenty countries mainly from the Middle East, North Africa, and Southeast Asia during the time period from 1999 through 2014. We employ commonly used panel data estimators such as Pooled OLS and Fixed Effects, as well as the generalized method of moments (GMM) to address a possible endogeneity of the banking development indicators. Our findings show that on the one hand Islamic banking development in countries with a dual banking system hinders economic growth while on the other hand it boosts international trade. The study further discusses why Islamic banking might actually obstruct growth