The effect of financial indicators on economic growth in Islamic countries using a non-linear model

One of the factors that play an essential role in achieving the goal of rapid and continuous economic growth is the development of the financial sector of each country. Countries with a more developed financial system are on the path of faster economic growth because they make the economy in question capable of experiencing higher growth rates. The main purpose of this article is to investigate the effect of financial development indicators on economic growth in member countries of the Islamic Conference; Therefore, in order to examine this topic, the present article used one of the newest econometric approaches called the PSTR model and measured the non-linear effect of financial development indicators on economic growth in the member countries of the Islamic Conference during the period from 2008 to 2022. The results obtained from the PSTR model indicate the existence of a non-linear relationship between the studied variables. In the final PSTR model, the slope parameter, which indicates the speed of adjustment from one regime to another regime, is equal to 21.0818, the location of regime change is estimated to be 10.5986. Therefore, if the financial development index (the ratio of internal credits of banks to gross domestic product) exceeds 10.5986 percent, the behavior of the variables will be according to the second regime, and if it is less than the above threshold, it will be placed in the first regime. The coefficients of the variables (percentages) have been estimated. The obtained results show that the financial development index (the ratio of internal credits of banks to gross domestic production) has a different effect on economic growth in both regimes.