Economic Forces and the Sukuk Market

• Main Authors: Nursilah, Ahmad,, Siti Nurazira, Mohd Daud,, Zurina, Kefeli,
• Format: Conference Paper
• Language: en_US
• Published: Elsevier Science Bv 2015
• Subjects: VAR; Sukuk; Granger-causality; variance decomposition; macroeconomic variables
• Online Access: http://ddms.usim.edu.my/handle/123456789/8933

The aim of this study is to investigate macroeconomic influences on sukuk issuance in Malaysia for the period 1996-2011 at the aggregate level. Based on vector autoregressive models (VARs), variance decomposition (VDC) and impulse response functions (IRE), the results indicate that sukuk Granger-cause GDP while GDP Granger-causes both PPI and CPI. Sukuk are also driven by their own dynamics in the short horizon. The results have important policy implications to the decision-makers. Since sukuk issuance Granger-causes GDP, policy makers should design new policies to modernize the functional aspects of Islamic capital market. A further implication for international institutional investors is that sukuk have the competitive advantage since it targets a segment of the global markets that has not been penetrated by other rivals. (C) 2012 Published by Elsevier Ltd.