The effects of participation banking on GDP and stock markets: Evidence Bahrain, Katar, Saudi Arabia and Turkey (2011-2020)

Participation banking is growing rapidly in today's world that its existence cannot be ignored. The growth of the banking sector has forced big banks to open Islamic windows to serve the niche market. Although the sector has gained momentum in several countries, its contribution to financial markets and economic growth has not been of much interest to many countries. The aim of this study is to investigate the contribution of participation banking to fınancial markets and economic development. Four countries that implement participating banking namely, Turkey, Saudi Arabia, Qatar and Bahrain. Gdp and return on stock indexes serve as proxies to the measurement of economic and financial development. Quarterly data from participation banks, stock market participation indices and GDP of the relevant countries is analyzed. Return on assets and return on investments are the explanatory variables. The ten-year time series data between 2011 and 2020 was used. The Autoregressive Distributed Lag (ARDL) model and the Toda Yamamoto Granger causality model are used on the time series dataset. The findings for Bahrain concluded that a strong unidirectional relationship between GDP and Return on Investments (ROI), Return On Total Index (ROTI) and ROI. Qatar had a bidirectional relationship between GDP and ROI, ROTI and ROA and ROTI and ROI, also strong one-way relationship between GDP and ROA. A one-way relationship between ROTI and ROA, ROTI and ROI for Saudi Arabia exists. In Turkey existence of a bidirectional strong relationship between GDP and ROI, ROTI and ROA, and ROTI and ROI was shown.