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Business cycle volatility, growth and financial openness: Does Islamic finance make any difference?

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  • Mustapha Djennas

Abstract

This paper presents an approach for assessing the contribution of Islamic finance in an economic system by modeling a composite index in order to analyze the risk of crises caused by financial openness and its impact on growth and volatility of business cycles. Through a sample of 14 industrialized countries in the world, of which 8 countries are considered as leaders of Islamic finance, this study aims to establish a comparative analysis between the economic performances of the two sets of countries. The considered period ranges from 1980 to 2013 covering the most important crises experienced by the selected countries. Overall, the results showed a relatively similar performance between economies where Islamic finance prevails, and other conventional economic systems. Moreover, when considering some specific components of the financial stress index, countries that adopt the principles of Islamic finance are strongly positioned to avoid various situations of crisis and economic downturns.

Suggested Citation

  • Mustapha Djennas, 2016. "Business cycle volatility, growth and financial openness: Does Islamic finance make any difference?," Borsa Istanbul Review, Research and Business Development Department, Borsa Istanbul, vol. 16(3), pages 121-145, September.
    • Handle: RePEc:bor:bistre:v:16:y:2016:i:3:p:121-145
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    Citations

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    Cited by:

    1. Abedifar, Pejman & Giudici, Paolo & Hashem, Shatha Qamhieh, 2017. "Heterogeneous market structure and systemic risk: Evidence from dual banking systems," Journal of Financial Stability, Elsevier, vol. 33(C), pages 96-119.
    2. Dr. Olalekan Akinrinola & Aruwa Isah Yusuf, 2020. "Growth and Financial Performance of Islamic Banks in Nigeria: The Monetary Policy Impact," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 4(12), pages 01-09, December.
    3. Nepal, Rabindra & Zhao, Xiaomeng & Liu, Yang & Dong, Kangyin, 2024. "Can green finance strengthen energy resilience? The case of China," Technological Forecasting and Social Change, Elsevier, vol. 202(C).
    4. Niaz Ali & Muhammad Tariq & Asia Baig, 2017. "A Statistical Investigation of Business Cycles Characteristics in Pakistan," Global Economics Review, Humanity Only, vol. 2(1), pages 73-84, December.
    5. Hunjra, Ahmed Imran & Islam, Faridul & Verhoeven, Peter & Hassan, M. Kabir, 2022. "The impact of a dual banking system on macroeconomic efficiency," Research in International Business and Finance, Elsevier, vol. 61(C).

    More about this item

    Keywords

    Business cycles; Growth; Volatility; Islamic finance;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G01 - Financial Economics - - General - - - Financial Crises

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