Foreign Direct Investment and Islamic Banking: A Granger Causality Test

Tajgardoon, Gholamreza; Noormohamadi, Khosro; Behname, Mehdi
July 2012
Economics & Finance Review;Jul2012, Vol. 2 Issue 5, p8
Academic Journal
The purpose of this article is studying causality relationship between FDI and Islamic banking. Panel unit root tests show that the variables are stationary at level. Pedroni test indicates that there is not log run relationship between FDI and Islamic banking. We have chosen 9 countries from Organization Islamic Conference (OIC) over the period 1995-2010. The results show that there is a bidirectional relationship between these variables (the feedback relationship). It means that FDI reinforce Islamic banking and Islamic banking attracts foreign direct investment. For FDI attraction governments should devote attention on Islamic banking.


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