Malik Waseem Jan2025-07-292025-07-292018https://escholar.umt.edu.pk/handle/123456789/3951The study unveiled the nexus between Islamic capital market and real economic activity in Pakistan. In order to ascertain the true nature of the relationship, Islamic Shariah Compliant Index (Karachi Meezan Index) and Large Scale Manufacturing Index (LSMI) were used as proxies. Additionally, conventional stock index (KSE-100), Interest rate (KIBOR) and real exchange rate were used as control variables in the study. Rigorous time series analysis was executed on the basis of monthly data set from Statistical Bulletin of State Bank of Pakistan and Pakistan Stock Exchange that covered a time period from September 2008 to December 2017. Time series techniques have been used for data analysis; this included JJ Co-integration Test, Granger Causality Test, Impulse Response Functions (IRF), and Variance Decomposition Analysis (VDC). The empirical results confirmed long term bidirectional causal relationship between Islamic Shariah Stock Index and Real Economic Activity in Pakistan. The findings of the study reinforce the notion that development of Islamic capital market leads to augmented level of real economic activity in the economy.en-USThesis