Islamic finance value versus conventional finance, dynamic equilibrium relationships analysis with macroeconomic variables in the Jordanian economy: an ARDL approac


Ayman Abdalmajeed Alsmadi,Mohammad Salem Oudat,Hafnida Hasan
Vol-130-Issue-Sep-17-2020

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Abstract

The aim of this paper is to investigate the long and short run equilibrium relationship between conventional finance volume (CFV) and macroeconomic variables in one hand, and the long run and short run equilibrium relationships between Islamic finance volume (IFV) and macroeconomic variables in the other hand. BRIGHT LINK RSEARINTERNATIONAL Autoregressive Distributed Lag (ARDL) approach has been utilized for the sample of (1983-2015) period, to analyze the short and long run relationship between IFV and macroeconomic variables. The results show that there are existed evidences of long run and short run relationships among variables of this study. Also the results of error correction term (ECTt-1) showed that the IFV achieved high adjusted speed from the short run to the long run equilibrium by (17 months and 27 days) compared with CFV which needs to (20 months and 10 days). This study recommended that this is an opportune time to The results show that there are existed evidences of long run and short run relationships among variables of this study. Also the results of error correction term (ECTt-1) showed that the IFV achieved high adjusted speed from the short run to the long run equilibrium by (17 months and 27 days) compared with CFV which needs to (20 months and 10 days). This study recommended that this is an opportune time to using Islamic finance system in order to reduce reliance on conventional system products and move into Islamic finance system which is closer to equity-based products and risk-sharing instruments. This paper uses empirical evidence to compare between Islamic finance and conventional finance. To the best of the authors’ knowledge, the study on the role of Islamic finance industry towards reducing of economic obstacles, particularly in the context of Jordan economy.

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