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Liquidity and Financial Stability Conventional versus Islamic Banks

Ameni Ghenimi and Mohamed Ali Brahim Omri
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Ameni Ghenimi: Faculty of Economic Sciences and Management of Tunis, Tunisia.
Mohamed Ali Brahim Omri: College of Business Administration, Northem Border University, Kingdom of Saudi Arabia.

International Journal of Economics and Empirical Research (IJEER), 2015, vol. 3, issue 9, 419-432

Abstract: Purpose: This article examines the relationship between liquidity and banking financial stability. Methodology- This paper uses dynamic simultaneous-equation panel data models for 28 Islamic banks and 53 conventional banks over the period 2006-2013. Findings- Our results provide evidence of bidirectional causality between liquidity and banking financial stability for global panel, and in Islamic and conventional banks. As a result, banks have an incentive to take the direct impact of liquidity on stability. Recommendations- These empirical insights are of particular interest to regulators by encouraging banks to reduce the risks on their balance sheets and facilitating the liquidation of assets in a crisis.

Keywords: Bank liquidity; Bank stability; Islamic bank Conventional bank (search for similar items in EconPapers)
JEL-codes: E58 (search for similar items in EconPapers)
Date: 2015
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