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Systemic risk of Islamic Banks

Author

Listed:
  • Paolo Giudici

    (Department of Economics and Management, University of Pavia)

  • Shatha Hashem

    (Omar Ibn Al-Khattab Street, Nablus, Palestine)

Abstract

The main aim of this paper is to investigate the proposition that Islamic banking services support financial stability. We examine this proposition using network modelling for stock market returns based on graphical Gaussian distributions, aimed at capturing the contagion effects that move along countries, combined with a regression modelling approach, aimed at capturing the effect of bank- specific strategies, that depend on the degree of Islamic financial services spe- cialization levels. The integration between the two models will enable us to distinguish the systemic correlations between banks due to common idiosyn- cratic characteristics, from the systemic correlation that can be attributed to country effects that are common to all banks in a given country. Our proposed models are applied to the MENA region banking sector for the period from 2007 to 2014.

Suggested Citation

  • Paolo Giudici & Shatha Hashem, 2015. "Systemic risk of Islamic Banks," DEM Working Papers Series 103, University of Pavia, Department of Economics and Management.
    • Handle: RePEc:pav:demwpp:103
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    References listed on IDEAS

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    Keywords

    Camels regression; Centrality measures; Graphical Gaussian models; Islamic bank specialisation levels;
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