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Is Islamic Banking More Procyclical? Cross-Country Evidence

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  • Alexandra ZINS

    (LaRGE Research Center, Université de Strasbourg)

  • Laurent WEILL

    (LaRGE Research Center, Université de Strasbourg)

Abstract

This paper investigates cyclicality of Islamic banking relative to conventional banking. We examine whether loan growth and profitability have a different sensitivity to economic growth for Islamic banks and for conventional banks. We use panel data from 525 banks covering 16 countries with dual banking systems spanning the period from 2008 to 2018. We find no difference in lending cyclicality: Islamic banks and conventional banks have both a procyclical lending behavior. Profitability is procyclical for Islamic banks but not for conventional banks. Our findings support the view that Islamic banking presence does not contribute to strengthen economic stability.

Suggested Citation

  • Alexandra ZINS & Laurent WEILL, 2020. "Is Islamic Banking More Procyclical? Cross-Country Evidence," Working Papers of LaRGE Research Center 2020-03, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    • Handle: RePEc:lar:wpaper:2020-03
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    More about this item

    Keywords

    Islamic banking; loan growth; financial stability; bank profitability; business cycles; procyclicality.;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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