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This paper investigates the determinants of the pattern of Islamic bank diffusion around the world using country-level data for 1992 - 2006. The analysis illustrates that income per capita, share of Muslims in the population and status as an oil producer are linked to the development of Islamic banking, as are economic integration with Middle Eastern countries and proximity to Islamic financial centers. Interest rates have a negative impact on Islamic banking, reflecting the implicit benchmark for Islamic banks. The quality of institutions does not matter, probably because the often higher hurdle set by Shariah law trumps the quality of local institutions in most countries. The 9/11 attacks were not important to the diffusion of Islamic banking; but they coincided with rising oil prices, which are a significant factor in the diffusion of Islamic banking. Islamic banks also appear to be complements to, rather than substitutes for, conventional banks.

Banks and Banking --- Macroeconomics --- Islamic Banking and Finance --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Economic Development: General --- Other Economic Systems: Public Economics --- Financial Economics --- Energy: Demand and Supply --- Prices --- Interest Rates: Determination, Term Structure, and Effects --- Banking --- Finance --- Islamic banking --- Commercial banks --- Oil prices --- Islamic finance --- Financial services --- Financial institutions --- Real interest rates --- Banks and banking --- Islamic countries --- Interest rates --- Malaysia

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This edition of the Middle East and North Africa (MENA) regional economic update shows that recovery in the region is below historical trends. Its economic prospects depend on global developments and continued strengths in emerging-market demand and oil price trends. Growth in the region is expected to average 4% in 2010, an increase of slightly less than 2 percentage points (pp) over growth in 2009 and weak compared to increases of 5.6pp in advanced economies and 4.5pp in developing nations. Only by 2011 and 2012 is MENA s growth expected to return to the average rates achieved prior to the economic and financial crisis. Recovery has been driven by the global economic rebound and, to varying degrees, by domestic stimulus. Industrial production, which in MENA is dominated by oil, has nearly reached its pre-crisis peak, largely due to the strong recovery in emerging markets, especially Asia. However, the upturn has weakened in recent months because the global slowdown has arrived sooner and is occurring faster than previously anticipated, and there are serious concerns about the sustainability of the global recovery. In response, MENA governments have continued to stimulate their economies in 2010, and even those that did not use any type of fiscal stimulus in 2009 have started implementing fiscal measures in 2010. The economic recovery in MENA has been much less vigorous than the recovery in countries that suffered sharp output contractions. The sustainability of the recovery in Gulf Cooperation Council (GCC) economies depends on developments in the rest of the world, and on the extent to which they affect oil markets. The outlook for the global economy and oil markets in the second half of 2010 remains uncertain, and a decline in oil prices cannot be ruled out.

Accounting --- Business Cycles and Stabilization Policies --- Capital Flows --- Central Banks --- Commodity Prices --- Debt --- Debt Restructuring --- Developing Countries --- Economic Forecasting --- Economic Growth --- Employment and Unemployment --- Equity Markets --- Expenditures --- Exporters --- Financial Crisis --- Financial Institutions --- Fiscal Policy --- Free Trade Agreements --- Global Economy --- Income Tax --- Inflation --- Insurance --- Interest Rates --- Investment Climate --- Islamic Finance --- Labor Markets --- Letters of Credit --- Macroeconomics and Economic Growth --- Mortgages --- Price Volatility --- Private Investment --- Public Spending --- Recession --- Regulatory Reform --- Remittances --- Risk Aversion --- Securities --- Social Protections and Labor --- Tax Exemptions --- Telecommunications --- Trade Liberalization --- Uncertainty