The impact of new millennium crises on the power of Islamic banks in deposit markets

Alhalboni, M and Baldwin, K ORCID: https://orcid.org/0000-0003-0606-5553, 2024. The impact of new millennium crises on the power of Islamic banks in deposit markets. International Journal of Finance and Economics. ISSN 1076-9307

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Abstract

We investigate the impact of three crises on the power of Islamic banks in deposit markets: the Global Financial Crisis, 2007-9 (GFC), the Arab Spring political crisis, 2011-13, and the Covid-19 health crisis, 2020-2022. Applying difference-in-difference and GMM techniques to panel data for 2004-2022, we find that the power of Islamic banks increased in countries most affected by the GFC, but only for oil-exporters, as elevated oil prices inflated deposited liquidity. In contrast to the GFC, the market power of countries highly affected by the Arab Spring decreased as depositors withdrew en masse. For these countries, oil export status was irrelevant, and whilst government integrity is significant, it accounts for a small amount of heterogeneity in the country-level cross-section due to widely held public attitudes towards institutions during the crisis. For Covid-19, the market power of Islamic banks initially increased at the outset of the pandemic due to a surge in precautionary deposits, but later decreased due to economic activity constraints. The stringency of lockdowns had little effect on market power in countries that suffered the highest Covid-19 death rates. These and other findings specific to each crisis provide a rich array of private and public policy implications relevant to crises of different types for bank liquidity crisis management, financial conduct policies, and state-backed lending stimulus packages.

Item Type:	Journal article
Publication Title:	International Journal of Finance and Economics
Creators:	Alhalboni, M. and Baldwin, K.
Publisher:	Wiley
Date:	14 August 2024
ISSN:	1076-9307
Identifiers:	Number Type 10.1002/ijfe.3034 DOI 2187225 Other
Rights:	© 2024 The Author(s). International Journal of Finance & Economics published by John Wiley & Sons Ltd. This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.
Divisions:	Schools > Nottingham Business School
Record created by:	Melissa Cornwell
Date Added:	06 Aug 2024 08:57
Last Modified:	10 Sep 2024 08:55
URI:	https://irep.ntu.ac.uk/id/eprint/51926

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