Oil price volatility, Islamic financial development and economic growth in Gulf Cooperation Council (GCC) countries

This paper investigates the relationship between oil terms of trade growth volatility and economic growth in the GCC countries. Further it explores the possible effect of Islamic financial development on such relationship. By analyzing a sample of five GCC countries over the period of 1996–2016, we find empirical evidence of a significant positive relationship between oil terms of trade growth volatility and economic growth. Our results also indicate that the effect of oil terms of trade growth volatility on growth is reinforced by the development of Islamic financial system.