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Jurnal Ekonomi Malaysia

53 (2) 2019 199 – 211

The Influence of Macroeconomics Factors and Political Risk on the Sukuk Market Development in Selected GCC Countries: A Panel Data Analysis
Pengaruh Faktor Makroekonomi dan Risiko Politik ke atas Pembangunan Pasaran Sukuk di Negara GCC Terpilih: Analisis Data Panel

Islamic Business School
College of Business
Universiti Utara Malaysia
06010 Sintok Kedah
MALAYSIA

ama.alraei@yahoo.com

Islamic Business School
College of Business
Universiti Utara Malaysia
06010 Sintok, Kedah
MALAYSIA

zairy@uum.edu.my

Islamic Business School
College of Business
Universiti Utara Malaysia
06010 Sintok Kedah
MALAYSIA

khilmy@uum.edu.my

Abstract

In light of the countries’ attempt to develop their economies and follow stable macroeconomic policies that stimulate the sukuk markets and the stress placed on the political stability of the countries, investigating the role of political risk and macroeconomic factors is crucial to sustain a country’s Islamic financial development. Therefore, this study used the panel data to examine the influence of the macroeconomic factors and political risk on the sukuk market development in the selected GCC countries, namely Saudi Arabia, United Arab Emirate, Bahrain, Qatar and Kuwait from 2001 to 2016. The model of sukuk market development is extended by incorporating the six specific characteristics of GCC countries. The diagnostic tests affirm that the most preferred model to explain the determinants of sukuk market development is by using the Pooled Ordinary Least Square (POLS) Model. The findings reveal that the banking sector and exchange rates are negative and have significant effects on the sukuk market development. The consideration of the increasing level of trade openness is vital due to its major contribution to enhance the sukuk market development. Interestingly, this study finds a positive significant association between the political risk and the sukuk market development. In order to promote the sukuk market development in the region, it is important to develop strategies for integrating and linking the banking sector and the sukuk market in order to promote the sukuk market by creating a scale economy and the required financial market infrastructure.

Keywords

GCC countries; Islamic finance; panel data; Political risk; Sukuk market
http://dx.doi.org/10.17576/JEM-2019-5302-15
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Al-Raeai, , Zainol, , & Abdul Rahim, (2019). The Influence of Macroeconomics Factors and Political Risk on the Sukuk Market Development in Selected GCC Countries: A Panel Data Analysis. Jurnal Ekonomi Malaysia, 53(2), 199–211. http://dx.doi.org/10.17576/JEM-2019-5302-15

@article{alraeai2019influence,
  title={The Influence of Macroeconomics Factors and Political Risk on the Sukuk Market Development in Selected GCC Countries: A Panel Data Analysis},
  author={Al-Raeai, Arafat Mansoor and Zainol, Zairy and Abdul Rahim, Ahmad Khilmy},
  journal={Jurnal Ekonomi Malaysia},
  volume={53},
  number={2},
  pages={199—211},
 

year={2019},
}

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