Liquidity creation performance and financial stability consequences of Islamic banking: Evidence from a multinational study

Allen N. Berger, Narjess Boubakri, Omrane Guedhami and Xinming Li

Journal of Financial Stability, 2019, vol. 44, issue C

Abstract: Despite the growth of Islamic banks (IBs), little is known about their liquidity creation performance and financial stability consequences relative to conventional banks (CBs). We address these issues using data from 24 countries over 2000–2014. We find IBs create more liquidity per unit of assets than CBs, primarily on the asset side of the balance sheet. Results are economically significant, econometrically robust, hold in high- and low-income countries, and during the Global Financial Crisis and other times. In addition, CB liquidity creation results in reduced national financial stability, particularly in high-income countries, whereas IB liquidity creation does not.

Keywords: Islamic banks; Bank liquidity creation; Financial stability (search for similar items in EconPapers)
JEL-codes: G15 G21 G28 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (42)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:44:y:2019:i:c:s1572308918306582

DOI: 10.1016/j.jfs.2019.100692

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