REVISITING TEMPORAL CAUSALITY BETWEEN ISLAMIC FINANCE INSTRUMENTS AND OUTPUT

With the onset of COVID-19 pandemic, financing would again be crux recovery process. This paper revisits existing literature on how financial development promotes growth by focusing role Islamic finance in Malaysia. Specifically, sukuk and loans banks output is examined The main objective this to investigate causal nexus between sukuk, banking loan, using a bootstrap causality test applied both full sample rolling window sub-samples. Data ranges from 2000M1-2021M6 for market 2006M12-2021M6 loans. We rely windows which allow time-varying causalities within time-series data. Results indicate evidence that instruments, case, Granger-cause long run. Even run, non-constancy parameters detected total finance, transport. parameter stability tests short run transport, utility - equation. In case via loans, short-run instability prevalent all loan–output equations. take analysis further examining direction lead variables multi-time scale continuous wavelet transforms coherence. show runs whereas construction seems exhibit mixed behaviour. impact more pronounced very-long These findings could guide countries intending use instruments as one tools fiscal stimulus or post-pandemic economic recovery.