scholarly journals Do Oil Price Shocks and Other Factors Create Bigger Impacts on Islamic Banks than Conventional Banks?

Energies ◽  
2020 ◽  
Vol 13 (12) ◽  
pp. 3106
Author(s):  
Jabir Esmaeil ◽  
Husam Rjoub ◽  
Wing-Keung Wong
Keyword(s):  
Oil Price ◽  
Oil Price Shocks ◽  
Islamic Banks ◽  
Price Shocks ◽  
Gcc Countries ◽  
Long Run ◽  
Oil Price Shock ◽  
Price Shock ◽  
Conventional Banks ◽  
Conventional And Islamic Banks

The main aim of this study is to empirically examine and compares the impacts of oil price shocks, Arab revolutions, some macroeconomics, and bank-specific variables on bank profitability indicators between Conventional and Islamic banks in Gulf Cooperation Council (GCC) countries. The study employed panel Autoregressive-Distributed Lag (ARDL) techniques to examine the causal relationship both at the short and long-run. Our results reveal that most of the variables employed in our study significantly influence Return on Asset (ROA), Return on Equity (ROE), and Net Interest Margin (NIM)/ Net Profit Margin (NPM) for both Conventional Banks (CBs) and Islamic Banks (IBs) similarly in the long run. Findings from our study imply that both CBs and IBs have some similar features in nature, which could be because of the structure of the policies for IBs is in line with the regulatory framework for the CBs. The main finding from the study is the significance of oil price shock and the Arab springs that are more pronounced in CBs than IBs. Also, it can be seen that a sustainable profit of IBs is higher than CBs due to the adjustment speed of IBs to equilibrium in the presence of shock is found to be higher than CBs. Hence, our study suggests that oil price shock could be utilized for having a prudent macro regulation for the banks in GCC countries. Our findings are useful to Government officers, bankers, investors, and researchers for their decision making by estimating future trends of the profitability for both Conventional and Islamic banks in the GCC countries.

scholarly journals DO OIL PRICE SHOCK, AND OTHER MACROECONOMIC VARIABLES AFFECT THE STOCK MARKET: A STUDY OF THE SAUDI STOCK MARKET

2020 ◽  
Vol 8 (3) ◽  
pp. 1234-1242 ◽  
Author(s):  
Naushad Alam
Keyword(s):  
Stock Market ◽  
Negative Relationship ◽  
Oil Price ◽  
Security Market ◽  
Oil Price Shocks ◽  
Price Shocks ◽  
Short Term ◽  
Macroeconomic Variables ◽  
Oil Price Shock ◽  
Price Shock

Purpose of the study: This work aims to find the type of relationship amongst the chosen variables, inflation (INF), short-term interest rate (SIR), money supply (M.S.) and crude oil price (COP) and oil price shocks represented by DUMMY respectively on the capital market of Saudi Arabia. It will also throw insight to policymaker to find factors which influence the capital market of Saudi Arabia and to take remedial measures to boost investment in the country. Research Methodology: The relationships amongst the Saudi security market, the oil price shock, and the selected macroeconomic variables as mentioned above are determined using the Johansen test of co-integration, the vector error correction model, and the Wald test. The research employs the time series data for a period of 2009to 2016, for the study. Findings: The results show a long-run equilibrium relationship between the Saudi stock market and the selected variables for the study. The study shows a positive association between the money supply and the stock market, but inflation, short-term interest rate, and crude oil price, the result indicates a negative relationship. Implications: The present study can have implications for the policymaker to take corrective measures for better performance of the stock market by controlling inflation and regulating the short-term interest rate.As the findings indicate that they have a negative relationship with TASI. This paper will also help the policymaker in identifying the real cause for the decline in the value of the stock price. A good performing stock market means better economic growth and overall economic development. To diversify the economy to have an alternative to the oil-driven economy to a more balanced economy by promoting other sectors like manufacturing and tourism. Novelty/Originality of this study: The literature review confirms that all work of oil price shock is related to its effect on the security market return. This work is different from the other study as it includes macroeconomic variables in the study, together with the oil price shocks. The study is unique from other studies as it is broader in approach, by including more variables than earlier studies which mostly included the oil price shocks and its impact on the stock market. There is no work done to investigate the joint effect of macroeconomic variables and oil price shocks on the Saudi stock market.

scholarly journals The Effect of Oil Price Shocks on the Dynamic Relationship between Current Account and Exchange Rate: Evidence from D-8 Countries

2013 ◽  
Vol 52 (4I) ◽  
pp. 537-556
Author(s):  
Syeda Qurat-Ul-Ain ◽  
Saira Tufail
Keyword(s):  
Exchange Rate ◽  
Current Account ◽  
Oil Price ◽  
Empirical Literature ◽  
Oil Price Shocks ◽  
Price Shocks ◽  
Oil Price Shock ◽  
Price Shock ◽  
External Sector ◽  
The Relationship

The effect of oil price shocks on global economy has been a great concern since 1970s and has instigated a great deal of research investigating macroeconomic consequences of oil price fluctuations. Later on, the instability in the Middle East and recent oil price hike confirmed the enduring significance of the issue. Though a voluminous body of literature has evolved examining the bearings of oil prices for internal sectors of economies [to name a few, e.g., Barsky and Kilian (2004); Kilian (2008a,b); Hamilton (2008)], the studies analysing the external sector response to oil price shocks are very few [see, e.g. Kilian, et al. (2007)]. The determination of current account and exchange rate—the two major indicators of external sector—has been studied widely in theoretical and empirical literature but mostly the discussion of the two variables largely remained separate [Lee and Chinn (1998)]. Similarly, investigation of simultaneous response of these two variables to an oil price shock remained relatively less ventured avenue of research. Initial work done on the relationship between current account and oil price could not ascertain conclusive link between these two variables.1 Recent work on the issue revealed the diversity of responses of current account of different countries to an oil price shock. For instance, oil price increase deteriorates current account balance of developing countries [OECD (2004); Rebucci and Spatafora (2006); Killian, et al. (2007)] but may improve it if the country happens to be a net oil-exporter. This implies that the relationship depends on the number of factors among which oil dependency of country, oil-intensity of production process2 and responses of non-oil trade balance3 and sources of oil price fluctuations4are of particular significance.

scholarly journals Capital and Liquidity Risks and Financial Stability: Pre, During and Post Financial Crisis Between Islamic and Conventional Banks in GCC Countries, in the Light of Oil Prices Decline

2019 ◽  
Vol 11 (1) ◽  
pp. 329
Author(s):  
Hamid Abdulkhaleq Hasan Al-Wesabi ◽  
Rosylin Mohammed Yusof
Keyword(s):  
Financial Crisis ◽  
Financial Stability ◽  
Liquidity Risk ◽  
Oil Prices ◽  
Islamic Banks ◽  
Independent Variables ◽  
Gcc Countries ◽  
Long Run ◽  
Conventional Banks ◽  
Conventional And Islamic Banks

Purpose: The main purpose of this paper is to investigate the impact of capital ratio and liquidity risks and the effects of the Global Financial Crisis (GFC) periods on financial stability of conventional and Islamic banks before, during, and after GFC in the year of 2008 five GCC countries. To examine empirically the comparison between conventional and Islamic banks based on financial stability and soundness, as well as capitalization and liquidity in the light of the adverse effects of GFC and oil prices declining during the period of (2000-2017).Design/methodology/approach: By using time series data, this study employs Pedroni’s panel cointegration analysis to test the long run relationship between financial stability of conventional banks and Islamic banks as a dependent variable and independent variables including financial crisis under three periods; pre (2006-2007), during (2008-2009) and post (2010-2011) crisis. As well as employing Generalized Least Squares (GLS) to examine the effects between independent variables which are GDP, inflation, financial crisis periods, oil prices fluctuations risk, banking competition, financial sector development, liquidity risk and capital adequacy ratio and dependent variable which is financial stability of conventional and Islamic banks in GCC countries before (2000-2006) during (2006-2009) and after (2010-2017) crisis.Findings: The findings of this research suggest that there is a long run relationship between financial stability of conventional and Islamic banks and capital ratios, liquidity risk and other independent variables. As well as study’s findings support some previous studies and it generally concludes that Islamic banks were performed better during the crisis than conventional banks. Whereas Islamic banks were more stable during crisis as their business model helped to limit the adverse effects of crisis in 2008, they were also more capitalized and less exposure to liquidity risk. Nevertheless, decrease in Islamic banks’ liquidity led some Islamic banks in GCC countries to declare significant losses in 2009.Originality/value: The result of the study contributes towards understanding the determinants of financial stability of both Islamic banks and conventional banks during financial crisis periods. It is important for policy ramifications by the Central Banks in GCC in terms of treating both types of banks differently to mitigate against future financial crises.

UAE Banks’ Performance and the Oil Price Shock: Evidence across Conventional and Islamic Banks

2019 ◽  
Vol 15 (3) ◽  
Author(s):  
Magda Elsayed Kandil ◽  
Minko Markovski
Keyword(s):  
Negative Impact ◽  
Oil Price ◽  
Islamic Banks ◽  
Fiscal Consolidation ◽  
Return On Assets ◽  
Return On Equity ◽  
Oil Price Shock ◽  
The Difference ◽  
Conventional Banks ◽  
Conventional And Islamic Banks

Abstract This study attempts to identify whether the oil price fall to a “new normal” in mid-September 2014 has had an impact on banks’ performance in the UAE, such as Return on Assets (ROA) and Return on Equity (ROE) in addition to credit and deposit growth. The sample is for a sample of 22 national banks in the country over a period of 15 quarters. The oil price fall has had a negative impact on all four banking indicators. In addition, the analysis evaluates the difference in ROA, ROE and credit and deposit growth by bank type, conventional vs. Islamic banks, across the sample of 22 banks. The results indicate that Islamic banks have a higher lending and deposit growth rates, however conventional banks tend to have better indicators of performance. Further, the oil price fall has impacted banks’ performance adversely, and the growth of assets and liabilities as a result of the slowdown in economic activity, fiscal consolidation, and decreasing levels of employment and corporate profitability. Further, Islamic banks, judged by lending and deposit growth, have managed to tailor their products to cater to a growing demand. However growth objectives appear to have reduced the margins of return in Islamic banks, compared to conventional banks.

scholarly journals Oil Price Shocks, Fuel Subsidies and Macroeconomic (In)stability in Nigeria

2020 ◽  
pp. 1-38
Author(s):  
Babatunde S. Omotosho
Keyword(s):  
Exchange Rate ◽  
Oil Price ◽  
New Keynesian ◽  
Oil Price Shocks ◽  
Price Shocks ◽  
Oil Price Shock ◽  
Price Shock ◽  
Fuel Subsidies ◽  
Short Run ◽  
The Exchange Rate

This paper studies the macroeconomic implications of oil price shocks and the extant fuel subsidy regime for Nigeria. To do this, we develop and estimate a New-Keynesian DSGE model that accounts for pass-through effect of international oil price into the retail price of fuel. Our results show that oil price shocks generate significant and persistent impacts on output, accounting for about 22 percent of its variations up to the fourth year. Under our benchmark model (i.e. with fuel subsidies), we show that a negative oil price shock contracts aggregate GDP, boosts non-oil GDP, increases headline inflation, and depreciates the exchange rate. However, results generated under the model without fuel subsidies indicate that the contractionary effect of a negative oil price shock on aggregate GDP is moderated, headline inflation decreases, while the exchange rate depreciates more in the short-run. Counterfactual simulations also reveal that fuel subsidy removal leads to higher macroeconomic instabilities and generates non-trivial implications for the response of monetary policy to an oil price shock. Thus, this study cautions that a successful fuel subsidy reform must necessarily encompass the deployment of well-targeted safety nets as well as the evolution of sustainable adjustment mechanisms.

Macroeconomic shocks, fragility and home financing in Malaysia: can rental index be the answer?

2018 ◽  
Vol 9 (1) ◽  
pp. 17-44 ◽  
Author(s):  
Rosylin Mohd Yusof ◽  
Farrell Hazsan Usman ◽  
Akhmad Affandi Mahfudz ◽  
Ahmad Suki Arif
Keyword(s):  
Interest Rates ◽  
Islamic Banks ◽  
Macroeconomic Shocks ◽  
Content Type ◽  
Long Run ◽  
Short Run ◽  
Rental Rate ◽  
Conventional Banks ◽  
The Impact ◽  
Conventional And Islamic Banks

Purpose This study aims to investigate the interactions among macroeconomic variable shocks, banking fragility and home financing provided by conventional and Islamic banks in Malaysia. Identifying the causes of financial instability and the effects of macroeconomic shocks can help to foil the onset of future financial turbulence. Design/methodology/approach The autoregressive distributed lag bound-testing cointegration approach, impulse response functions (IRFs) and forecast error variance decomposition are used in this study to unravel the long-run and short-run dynamics among the selected macroeconomic variables and amount of home financing offered by both conventional and Islamic banks. In addition, the study uses Granger causality tests to investigate the short-run causalities among the selected variables to further understand the impact of one macroeconomic shock to Islamic and conventional home financing. Findings This study provides evidence that macroeconomic shocks have different long-run and short-run effects on amount of home financing offered by conventional and Islamic banks. Both in the long run and short run, home financing provided by Islamic banks is more linked to real sector economy and thus is more stable as compared to home financing provided by conventional banks. The Granger causality test reveals that only gross domestic product (GDP), Kuala Lumpur Syariah Index (KLSI)/Kuala Lumpur Composite Index (KLCI) and house price index (HPI) are found to have a statistically significant causal relationship with home financing offered by both conventional and Islamic banks. Unlike the case of Islamic banks, conventional home financing is found to have a unidirectional causality with interest rates. Research limitations/implications This study has focused on analyzing the macroeconomic shocks on home financing. However, this study does not assess the impact of financial deregulation and enhanced information technology on amount of financing offered by both conventional and Islamic banks. In addition, it is not within the ambit of this present study to examine the effects of agency costs and information asymmetry. Practical implications The analysis of cointegration and IRFs exhibits that in the long run and short run, home financing provided by Islamic banks are more linked to real sector economy like GDP and House Prices (HPI) and therefore more resilient to economic vulnerabilities as compared to home financing provided by conventional banks. However, in the long run, both conventional and Islamic banks are more susceptible to fluctuations in interest rates. The results of the study suggest that monetary policy ramifications to improve banking fragility should focus on stabilizing interest rates or finding an alternative that is free from interest. Social implications Because interest plays a significant role in pricing of home loans, the potential of an alternative such as rental rate is therefore timely and worth the effort to investigate further. Therefore, Islamic banks can explore the possibility of pricing home financing based on rental rate as proposed in this study. Originality/value This paper examines the unresolved issues in Islamic home financing where Islamic banks still benchmark their products especially home financing, to interest rates in dual banking system such as in the case of Malaysia. To the best of the authors’ knowledge, studies conducted in this area are meager and therefore is imperative to be examined.

COMPARING THE IMPACTS OF OIL PRICE SHOCKS ACROSS STOCK MARKETS

2015 ◽  
Vol 77 (20) ◽  
Author(s):  
Siok Kun Sek ◽  
Zhan Jian Ng ◽  
Wai Mun Har
Keyword(s):  
Stock Returns ◽  
Stock Markets ◽  
Spillover Effect ◽  
Spillover Effects ◽  
Oil Price ◽  
Multivariate Garch ◽  
Oil Price Shocks ◽  
Price Shocks ◽  
Long Run ◽  
Short Run

We conduct empirical analyses on comparing the spillover effects of oil price shocks on the volatility of stock returns between oil importing and oil exporting countries. In particular, we seek to study how the nature of oil price shocks differs due to the oil dependency factor and how the stock markets react to such shocks. Applying the multivariate GARCH-BEKK(1,1) model, our results detect spillover effects between crude oil price and stock returns for all countries. The short run persistencies of shocks are smaller but the persistencies of shocks are very high in the long run. The results hold for both groups of countries. The results imply larger spillover effect from oil price shock into stock market in the oil importing countries.

scholarly journals Does Financial Instability of Conventional Banks Affect Financial Stability of Islamic Banks in GCC Countries?

2019 ◽  
Vol 11 (1) ◽  
pp. 361
Author(s):  
Hamid Abdulkhaleq Hasan Al-Wesabi ◽  
Rosylin Mohammed Yusof
Keyword(s):  
Financial Stability ◽  
Time Series Data ◽  
Panel Cointegration ◽  
Generalized Least Squares ◽  
Causal Link ◽  
Series Data ◽  
Islamic Banks ◽  
Gcc Countries ◽  
Long Run ◽  
Conventional Banks

Purpose: The main purpose of this paper is to investigate the relationship between financial stability in Islamic banks and financial stability and soundness in conventional banks for five GCC countries.Design/methodology/approach: By using time series data, this study employs Pedroni’s panel cointegration to test the long-run relationship between financial stability of Islamic banks and financial stability of conventional banks in GCC countries during the period of (2000-2017). Besides, the study also employs Granger causality to test the causal link between stability of two types of banks (Islamic and Conventional). As well as employing Generalized Least Squares (GLS) to examine the effects between independent variables which are financial stability of conventional banks and their profitability, impact of period of financial crisis (2008/2009), oil prices fluctuations, banking concentration and financial sector development and financial stability of Islamic banks (as the dependent variable).Findings: The findings of this research suggest that there is a long-run, significant and positive relationship between the financial stability of conventional banks and its Islamic counterpart. At the same time, the financial stability of conventional banks is found to Granger caused the stability of Islamic banks.Originality/value: The results of the study contribute towards understanding the determinants of the financial stability of both Islamic banks and conventional banks and how they affect each other. This is important for policy ramifications by the Central Banks in GCC in terms of treating both types of banks differently to mitigate against future financial crises.

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