Int. J. of Financial Innovation in Banking   »   2017 Vol.1, No.3/4

 

 

Title: Contagion between Islamic and conventional banks in Kuwait

 

Authors: Monia Ben Ltaifa; Walid Khoufi

 

Addresses:
Faculty of Economic Sciences and Management of Sfax, University of Sfax, Tunisia, Street of the Airport Km 4, BP 1169, 3018 Sfax, Tunisia
Institute of High Commercial Study in Sfax, University of Sfax, Tunisia, Street Sidi mansour Km 10, BP 43, 3061 Sfax, Tunisia

 

Abstract: Financial crises have highlighted the fragility of the banking system, especially for the case of conventional and Islamic banks. So, the objective of this paper is to verify the existence of the contagion effect between Islamic and conventional banks in Kuwait. Then, we use the dynamic conditional correlation-generalised autoregressive conditional heteroscedasticity (DCC-GARCH) model to estimate the conditional dynamic correlation to assess the financial contagion for a sample composed of three Islamic banks and five conventional banks during the period of study from 31 March, 2004 to 18 March, 2014. The empirical results show that the correlation between the returns of Islamic and conventional banks in Kuwait increased between the period of calm and crisis. This finding implies the existence of a contagion effect between Islamic and conventional banks in Kuwait. Also, thus result implies that financial contagion represents a major source for the spread of the crisis between the Islamic and conventional banks in Kuwait.

 

Keywords: contagion; Islamic; conventional; banks; DCC-GARCH; dynamic conditional correlation-generalised autoregressive conditional heteroscedasticity.

 

DOI: 10.1504/IJFIB.2017.10006431

 

Int. J. of Financial Innovation in Banking, 2017 Vol.1, No.3/4, pp.209 - 223

 

Submission date: 18 Apr 2016
Date of acceptance: 24 Oct 2016
Available online: 21 Jul 2017

 

 

Editors Full text accessAccess for SubscribersPurchase this articleComment on this article