Analysis of the frequency dynamics of spillovers and connectedness among Islamic and conventional banks and their determinants: evidence from Gulf Cooperative Council (GCC) markets

Tabash M.I. Billah M. Kumar S. Alam M.K. Balli F.
2023 Routledge

Applied Economics
2023 #55 Issue 50 5895 - 5924 pp.

The study investigates the return spillovers across 20 Islamic and 34 conventional banks among GCC markets (UAE, Saudi Arabia, Bahrain, Qatar, Kuwait) over the period 2005–2022 based on Dieobold and Yilmaz (2014) and Barunik and Krehlik (2018) methods. The outcomes interestingly reveal that the spillover between markets is time-varying, asymmetric, and crisis-sensitive. Moreover, short-oriented spillovers dictate the long-oriented spillovers, while long-oriented spillovers establish the major chunk of the total return spillovers. The results of the DY and BK approach show a weak connectedness between all Islamic banks rather than conventional banks of GCC. Subsample analysis of COVID-19 and GFC strengthens the total and short-oriented spillovers more than long-term spillovers. The global financial stress is exposed with the most substantial coherence, increasing the connectedness of Islamic banks in the short and long-oriented markets compared to conventional banks. The results of the study have practical implications for bankers, central banks, Islamic banks, policymakers, international economic institutions, banking investors, FIIs, DIIs, and academia. Additionally, the current findings can be guiding forces for many investors across the world to take their portfolio decision by leveraging Islamic banks’ securities.

COVID-19 , Frequency dynamics spillovers , GCC markets , Global financial crisis , Islamic and conventional banks

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College of Business, Al Ain University, Al Ain, United Arab Emirates
School of Economics and Finance, Massey University, Auckland, New Zealand
Faculty of Management Studies, University of Delhi, New Delhi, India
BRAC Business School, BRAC University, Dhaka, Bangladesh
Higher School of Economics and Business, Al-Farabi Kazakh National University, Almaty, Kazakhstan
Department of Accounting and Finance, College of Business Administration, Prince Mohammad Bin Fahd University, Al Khobar, Saudi Arabia
Dr. Bhim Rao Ambedkar College, University of Delhi, New Delhi, India

College of Business
School of Economics and Finance
Faculty of Management Studies
BRAC Business School
Higher School of Economics and Business
Department of Accounting and Finance
Dr. Bhim Rao Ambedkar College

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