Sukuk, financial crises and growth: empirical evidence from Islamic capital markets

Purpose This paper analyses the role of Sukuk issuance in driving economic growth amid the Global Financial Crisis (2007–2009), considering both short-term fluctuations and long-term outcomes during periods of financial distress. Design/methodology/approach Using the Pooled Mean Group (PMG) approach of the ARDL model, the study analyses panel data from major Sukuk-issuing countries over the period ranging from 2001 to 2022. The analysis includes four sample periods: Pre-GFC, During-GFC, Post-GFC and the Full sample. Key variables include GDP growth and Sukuk issuance, with controls for Gross Fixed Capital Formation, General Government Final Expenditure, Inflation, Trade Openness, the Financial Development Index and a GFC dummy. Findings The results show that Sukuk issuance positively impacts long-term economic growth in the Pre-GFC, Post-GFC and full sample periods but has a negative impact during the GFC. Short-term relationships are insignificant. Panel causality analysis reveals a unidirectional link from GDP growth to Sukuk issuance in the Pre-GFC period, supporting Robinson’s “Demand-Following Hypothesis,” and a bidirectional relationship during the GFC, Post-GFC and the full sample, aligning with Patrick’s “Feedback Hypothesis”. Social implications These outcomes yield meaningful guidance for policymakers, financial institutions and investors, highlighting Sukuk’s potential for risk management, long-term growth and portfolio optimization during periods of financial instability. Originality/value This study uniquely explores Sukuk’s role in economic growth throughout the Global Financial Crisis (2007–2009), offering insights into its potential as a resilient instrument for risk management and sustained growth.