Does the growth relevance of Islamic bank financing vary across growth regimes in Türkiye? Evidence from QARDL and bootstrap Fourier Granger causality in quantiles approaches

Purpose This study aims to investigate whether the relationship between Islamic banking and economic growth differs across alternative growth regimes in Türkiye, focusing on the long-run and short-run dynamics of this association. Design/methodology/approach Real gross domestic product is used as the dependent variable, while participation banks’ financing to the private sector is used as the main indicator of Islamic banking activity. Gross fixed capital formation, labor productivity, the real effective exchange rate, government expenditure and trade openness are included as control variables. The analysis relies on quarterly data spanning 2005Q4–2025Q2 and applies the quantile autoregressive distributed lag (QARDL) model together with the bootstrap Fourier Granger causality in quantiles (BFGC-Q) approach. Findings The long-run QARDL estimates indicate that Islamic bank financing has a positive and statistically significant effect on economic growth across the entire conditional distribution. The magnitude of this effect varies only modestly across growth regimes, while short-run dynamics exhibit asymmetric adjustment patterns across quantiles. Islamic banking acts as a reliable financing engine in the Turkish economy, regardless of whether the country is in a period of rapid expansion or economic stagnation. Notably, this finding demonstrates that participation banks successfully maintain their growth-supporting role even under adverse economic conditions, effectively bypassing the “credit crunch” dynamics and tightening lending standards commonly observed in conventional financial systems. This finding offers calibrated insights for macro-prudential policy, suggesting that expanding participation banking can provide a resilient complementary buffer to support economic stability, particularly when conventional lending channels become constrained. Originality/value To the best of the author’s knowledge, this is the first study to jointly use the QARDL model and the BFGC-Q approach to examine the growth effects of Islamic banking across different growth regimes in Türkiye. By capturing distributional heterogeneity and regime-dependent dynamics, the study provides novel evidence on how Islamic bank financing influences economic growth under low-, medium- and high-growth conditions. In particular, the finding that Islamic banking maintains a positive contribution to economic growth even under low-growth regimes represents an original contribution to the literature on Islamic finance in Türkiye.