Foreign direct investment, economic growth and Islamic banking industry

Abstract

The purpose of this paper is to investigate the effect of FDI and Islamic banking on the increase of economic growth in Islamic countries in the 1990-2010 periods.<br><br>The IPS unit root test indicates that variables are stationary in level and Hausman test suggests that we should apply the fixed effects model. The estimation of the model parameters leads us to conclude that FDI and the Islamic banking industry have a positive and significant effect on economic growth and variables such as human capital, economic infrastructure and capital formation have also positive effect on GDP. On the other hand, GDP, human capital and infrastructure attract FDI but Islamic banking has a weak positive effect on FDI attraction.