How Sukuk and Conventional Bond Affect Economic Growth? Evidence From Indonesia

Abstract

This study is aimed to show how big the impact of sukuk and conventional bond toward Indonesia's economic growth in the period of 2011-2019 by using ARDL method to observe the impact on the short term and long term. The result of this study shows that on the short term, sukuk does not affect the economic growth and bonds affect the economic growth. As on the long term, sukuk affects the economic growth and bonds do not affect the economic growth. This shows that Indonesian people see sukuk better than conventional bonds in the future.

The Contribution of Islamic Capital Market and Islamic Insurance to Inclusive Economic Development in Indonesia

“…Sukuk has proven to have a positive effect, which means that if there is an increase in Sukuk, it will increase the inclusiveness of economic development in Indonesia. The results of this study are in line with previous studies by (Smaoui & Khawaja, 2017); (Ledhem, 2020); (Kartini & Milawati, 2020); and (Tan & Mohamad Shafi, 2021).…”

“…In the context of Southeast Asia, (Ledhem, 2020) demonstrated that Sukuk financing is boosting economic growth in Southeast Asia, which mirrors the significant part of the Islamic financial markets of Sukuk as a vigorous contributor to economic growth. Furthermore, (Kartini & Milawati, 2020) elaborated a comparative study between Sukuk and conventional bonds in Indonesia linked to economic growth. Using an ARDL (Auto-Regressive Distributed Lag) method, they experimental the effect of Islamic bond (Sukuk) on short-and long-term economic growth.…”

“…While, (Tan & Mohamad Shafi, 2021); (Smaoui & Khawaja, 2017) studied the capital market and economic growth in Malaysia, and Sukuk represents one of the Islamic capital market instruments. (Ledhem, 2020) demonstrated that Sukuk financing is boosting economic growth in Southeast Asia, and (Kartini & Milawati, 2020) elaborated a comparative study between Sukuk and conventional bonds in Indonesia. The research conducted by (Ben Jedidia Khoutem, 2014); (Malikov, 2017); (Smaoui & Nechi, 2017); (Archer, 2018); (Sari, Syamsurijal, & Widiyanti, 2018); and (Yıldırım, Yıldırım, & Diboglu, 2020) also states that Sukuk can boost economic growth and development.…”

Islamic financial development & economic growth: the emergence of Islamic financial market in Pakistan

“…In this study, the ARDL cointegration regression technique has been used to assess the long-and short-term cointegration between Islamic financial development and economic growth (Pesaran et al, 2001). Consistent with the studies of Kartini and Milawati (2020), Orhan and Tirman (2021) and Fuadi et al (2022), ARDL is the most preferred model over other co-integration techniques for many reasons. First and foremost, the ARDL model simultaneously estimates the long-and short-run coefficients.…”

“…In the scarce literature on the Islamic bond and economic growth, the studies of Kartini and Milawati (2020) and Setianingsih and Widyastuti (2020) have identified the contribution of Sukuk to the economic growth of Indonesia. Both studies found that in the long run, Sukuk positively influences the economic growth, but in the short run, Sukuk has an insignificant and negative correlation with the economic growth.…”