During the past two decades, the Islamic finance industry has fulfilled significant development, particularly in the field of Islamic financial instruments. Sukuk represents one of the most prominent tools in Islamic finance in various markets worldwide, particularly in Malaysia. The study aims to examine the impact of Sukuk issuance on economic growth spanning the period 2006–2019. Malaysia is a model where it is the largest issuer of Sukuk. By using the Cointegration Test and Vector Error-Correction Model (VECM), the results show that there is a high level of the absorptive capacity of the Sukuk market in Malaysia. Furthermore, the Johansen Cointegration Test indicates that there is a cointegration relationship between GDP and Sukuk issuance. The long-term equilibrium relationship indicates that the increase of Sukuk issuance by 1% leads to an increase in GDP by 0.04% due to the increase of investments in the sectors issuing Sukuk.

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