Purpose – The purpose of this paper is to investigate empirically the impact of the Islamic Bank Financing on Malaysia’s economic growth over the period 2000Q1-2011Q4. Design/methodology/approach – A neoclassical production function augmented by some indicators of Islamic bank finance has been the theoretical framework for this paper’s empirical investigation. The unit root tests show that all the variables are integrated of order 1. The test of Johansen and Juselius (1990) has shown the existence of a single cointegrating relationship between the gross domestic product (GDP), the investment, the labor force and the indicator of Islamic bank finance. Hence, an error correction model has been constructed to estimate the economic growth elasticity with respect to the different Islamic bank finance indicators. Findings – The estimated elasticities show that, in the long run, the GDP in Malaysia is not sensitive to the Islamic financing. The estimation of an error correction model shows that the elasticity of the Malaysian output with respect to the different Islamic financing indicators in the short run turn around 0.35. Thus, the effect of the different Islamic finance indicators on the economic growth in the long run is less important than their effect in the short run. This economic result can be explained by the structure of the Islamic bank financing that marginalizes the profit-and-loss sharing (PLS)-based instruments. This turns out to be consistent with the economic reality in Malaysia, as the Islamic banks engage much more in non-participatory activities whose impact is, generally, of short term. Social implications – To improve the efficiency of the Malaysian Islamic banks as financial inter-mediaries that facilitate the capital accumulation and the economic growth, the paper suggests to strengthen the weight of the PLS-based instruments in the loan portfolios of the Malaysian Islamic banks. This may reduce inequalities and improve economic opportunities for people who have a high potential to contribute to the capital accumulation and the creation of the value-added. Originality/value – The contribution of this paper is two-fold. On the one hand, it provides a further contribution to the rare empirical literature relative to the impact of the Islamic finance on growth by determining the elasticity of economic growth with respect to Islamic bank financing in Malaysia. On the other hand, and to the best of the authors’ knowledge, this paper remains the first to correctly resort to the error correction model in determining this elasticity.

This article examines the consequences of the COVID‐19 crisis on the interdependencies between emerging and advanced economies. Using daily market index data from 22 developed and emerging markets, we develop a combination of statistical methods based on Diebold and Yilmaz spillover index and Toda–Yamamoto and Dolado and Lütkepohl causality approach. The results substantiate an increase in the interdependence between emerging and advances economies, which suggests an increase in the transmission of the stress and uncertainty between financial markets during the pandemic period. Our findings show that the emerging countries are affected by the financial markets of advanced economies during the COVID‐19 crisis and, in particular, by European markets, which appear to be the primary driver of contagion and transmission of stress and uncertainty to all other regional markets.

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