Oil Shocks and the Islamic Financial Market: Evidence from a Causality-in-Quantile Approach

Raheem, Ibrahim D.; le Roux, Sara; Rehman, Mobeen Ur

Abstract

This study examines the nonlinear relationship between Islamic finance and oil shocks. Nonlinearity is viewed from the prism of nonparametric causality-in-quantile, and oil price is decomposed into demand, supply, and risk. Using a dataset for ten sectoral Islamic finance stocks, we show that causality between the variables of interest is heterogeneous across (i) measures of shocks (i.e., demand, supply, or risk), (ii) types of the sector (i.e., the ten sectors), (iii) state of the market (bear, normal, bull) and (iv) model specifications (mean vs. variance equation) Policy implications of the results are discussed.

Citation

Raheem, I. D., le Roux, S., & Rehman, M. U. (2024). Oil Shocks and the Islamic Financial Market: Evidence from a Causality-in-Quantile Approach. International Economics, 180, Article 100559. https://doi.org/10.1016/j.inteco.2024.100559

• Journal Article Type: Article
• Acceptance Date: Oct 17, 2024
• Online Publication Date: Oct 19, 2024
• Publication Date: Nov 15, 2024
• Deposit Date: Jan 6, 2025
• Journal: International Economics
• Print ISSN: 2110-7017
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 180
• Article Number: 100559
• DOI: https://doi.org/10.1016/j.inteco.2024.100559
• Keywords: Islamic stocks, Oil price shocks, And causality-in-quantile
• Public URL: https://keele-repository.worktribe.com/output/955542
• Publisher URL: https://www.sciencedirect.com/science/article/pii/S2110701724000829?via%3Dihub