Sukuk Market Development and Macro-Economic Factors: Empirical Evidence from Pakistan

Abstract

This study is an attempt to find out the association between macro-economic variable
and Sukuk market development in Pakistan. Macro-economic variables are considered
as the mainstay for the development of Sukuk markets. Therefore, the scope of this
study is to find out the association between macro-economic variable viz. gross
domestic product, inflation, exchange rate, trade openness and Sukuk market
development in Pakistan. This research work is carried out by employing, explanatory
research design and utilizing the secondary data to assess the relationship between
Sukuk market development and macro-economic variables in Pakistan. Consequently,
VECM technique was used to assess this relationship for the period of 15 years from
2008-2022. The findings of this study demonstrated that only two variables i.e. GDP
and exchange rate have shown significant relationship with Sukuk market development
in the short-run. However, in the long-run all variables i.e. GDP, exchange rate and
trade openness, except inflation have shown significant relationship with Sukuk market
development in Pakistan. The results of this work may instigate the policy makers to
step-up with such innovative strategies, which can provide conducive growth for
macro-economic variables, and, consequently, lead to flourish the development of
Sukuk market in the country.