Examining the Connection between Financial Structure and Economic Development in Islamic Nations

Certainly, the pursuit of continuous progress and, consequently, economic growth is a universally shared objective among nations. Therefore, it is imperative to identify the factors that influence economic advancement to attain this goal. Various factors, including the accumulation of physical capital, human capital, the degree of economic openness, and foreign direct investment, have been scrutinized for their roles in this endeavor. In recent years, there has been a growing recognition of the significance of markets and financial intermediaries in enhancing economic progress, leading to numerous research studies. This particular study seeks to investigate the relationship between the development of the financial system and economic advancement in selected Islamic countries from 2005 to 2021. The data utilized comprises unbalanced panel data with national divisions. Two key variables, namely financial structure, and financial development, have been employed to assess the impact of financial system development. This approach not only enables an examination of financial development but also allows for an exploration of the influence of different types of financial structures as discussed in the theoretical literature. In this research, two models are employed: a panel data framework and the fully modified least squares method (FMOLS) to estimate the long-term co-accumulation vector. The results of these estimations are then analyzed. The findings reveal that both financial structure and financial development variables have a positive and statistically significant impact on economic progress. Given the substantial significance of these variables, as per the existing literature in this field, it can be inferred that a market-based financial system has a more pronounced effect in enhancing economic advancement. Certainly, the pursuit of continuous progress and, consequently, economic growth is a universally shared objective among nations. Therefore, it is imperative to identify the factors that influence economic advancement to attain this goal. Various factors, including the accumulation of physical capital, human capital, the degree of economic openness, and foreign direct investment, have been scrutinized for their roles in this endeavor. In recent years, there has been a growing recognition of the significance of markets and financial intermediaries in enhancing economic progress, leading to numerous research studies. This particular study seeks to investigate the relationship between the development of the financial system and economic advancement in selected Islamic countries from 2005 to 2021. The data utilized comprises unbalanced panel data with national divisions. Two key variables, namely financial structure, and financial development, have been employed to assess the impact of financial system development. This approach not only enables an examination of financial development but also allows for an exploration of the influence of different types of financial structures as discussed in the theoretical literature. In this research, two models are employed: a panel data framework and the fully modified least squares method (FMOLS) to estimate the long-term co-accumulation vector. The results of these estimations are then analyzed. The findings reveal that both financial structure and financial development variables have a positive and statistically significant impact on economic progress. Given the substantial significance of these variables, as per the existing literature in this field, it can be inferred that a market-based financial system has a more pronounced effect in enhancing economic advancement. Certainly, the pursuit of continuous progress and, consequently, economic growth is a universally shared objective among nations. Therefore, it is imperative to identify the factors that influence economic advancement to attain this goal. Various factors, including the accumulation of physical capital, human capital, the degree of economic openness, and foreign direct investment, have been scrutinized for their roles in this endeavor. In recent years, there has been a growing recognition of the significance of markets and financial intermediaries in enhancing economic progress, leading to numerous research studies. This particular study seeks to investigate the relationship between the development of the financial system and economic advancement in selected Islamic countries from 2005 to 2021. The data utilized comprises unbalanced panel data with national divisions. Two key variables, namely financial structure, and financial development, have been employed to assess the impact of financial system development. This approach not only enables an examination of financial development but also allows for an exploration of the influence of different types of financial structures as discussed in the theoretical literature. In this research, two models are employed: a panel data framework and the fully modified least squares method (FMOLS) to estimate the long-term co-accumulation vector. The results of these estimations are then analyzed. The findings reveal that both financial structure and financial development variables have a positive and statistically significant impact on economic progress. Given the substantial significance of these variables, as per the existing literature in this field, it can be inferred that a market-based financial system has a more pronounced effect in enhancing economic advancement.