On the Connectedness Between Bitcoin, Gold, Gold-Backed Cryptocurrencies and the G7 Banking Sector Stock Indices During Crises: Evidence from Quantile Vector Autoregression and Temporal Frequency Connectivity approach

PurposeThe purpose of this paper is to extend the literature on the spillovers across economic policy uncertainty (EPU) and cryptocurrency uncertainty indices.Design/methodology/approachThis paper uses cross-country economic policy uncertainty indices and the novel data measuring the cryptocurrency price uncertainties over the period 2013–2021 to construct a sample of 946 observations and applies the time-varying parameter vector autoregression (TVP-VAR) model to do an empirical study.FindingsThe findings suggest that there are cross-country spillovers of economic policy uncertainty. In addition, the total uncertainty spillover between economic policies and cryptocurrency peaked in 2015 before gradually decreasing in the following periods. Concomitantly, the cryptocurrency uncertainty has acted as the “receiver.” More importantly, the authors found the predictive power of economic policy uncertainty to predict the cryptocurrency uncertainty index. This paper’s results hold robust when using alternative measurement of cryptocurrency policy uncertainty.Originality/valueThis study is the first research that deeply investigates the association between two uncertainty indicators, namely economic policy uncertainty and the cryptocurrency uncertainty index. We provide fresh evidence about the dynamic connectedness between country-level economic policy uncertainty and the cryptocurrency index. Our work contributes a new channel driving the variants of uncertainties in the cryptocurrency market.

This paper explores the static and dynamic connectedness between oil price shocks (risk, demand and supply shocks) and Spanish sector equity indices from January-2000 to July-2019. We document sizable system-wide connectedness between the variables under study. Among the oil shocks, demand and risk shocks are the main transmitter (receiver) of shocks to (from) the system and are overall net receiver of shocks from the system. Among the equity indices, Industrials, Financials, Utilities and Telecommunications as the major net transmitters whereas; Consumer Goods, Technology, Retail and Telecommunications are the main net receivers. The dynamic connectedness changes over time and between sectors. We document important differences over time and between sectors, mainly during the recent global financial crisis and the European sovereign debt crisis. Overall, Financials, Telecommunications, Industrials and Utilities as the most influential sectors.

Investigating the spillovers and connectedness between green finance and renewable energy sources

The growing concerns about the exorbitant energy usage by the cryptocurrency market have become a topic of much discussion lately. With the aim of achieving the 17 SDG goals by 2030, finding effective solutions for making cryptocurrencies sustainable is important. One such solution is sustainable cryptocurrencies. This article employs time-varying parameter vector autoregression to examine the linkages between the sustainable cryptocurrencies (Ripple and Cardano), and fiat currencies of G7 and BRICS nations. The study considers the daily closing prices of the variables from 6 June 2019 to 6 June 2024 to identify the total connectedness among these variables, the net transmitters, and the net receivers of shocks. The analysis concludes that there is moderate connectedness among the variables. The findings reveal that Ripple, Cardano, Chinese Yuan, and Japanese Yen were net transmitters during the period studied. The study also concludes that global catastrophic events have little influence on the connectedness among the variables. The article has important implications for both investors and policymakers. Investors can rely on sustainable cryptocurrencies as hedges against fiat currency fluctuations, and policymakers can devise regulatory frameworks promoting more use of sustainable cryptocurrencies for a sustainable future.

Introduction: This study examines profitability ratios, risk management, and working capital management in Islamic and conventional banking sectors. Using a comparative approach, the analysis focuses on financial performance indicators such as Return on Equity (ROE), Non-Performing Financing (NPF)/Non-Performing Loan (NPL), and Current Ratio to identify differences and similarities between the two banking models. The Mann-Whitney U Test is applied to assess whether there are significant differences in these financial ratios between Islamic and conventional banks.Methods: The findings indicate that profitability ratios, risk management strategies, and working capital management differ significantly between the two banking sectors. Islamic banks have a unique financial structure due to Sharia compliance, which influences risk and capital management, including maintaining a more controlled NPF level. Meanwhile, conventional banks rely on interest-based financial mechanisms, shaping their profitability and liquidity strategies differently, including NPL and Current Ratio management to ensure financial stability.Results: The results of this study contribute to a deeper understanding of the financial performance of Islamic and conventional banks. These insights can serve as a guide for policymakers, investors, and banking institutions in making more strategic decisions regarding operations, risk mitigation, and financial planning. Keyword: Profitability Ratio, Risk Management, Working Capital Management, Return on Equity (ROE), Non-Performing Financing (NPF/NPL), Current Ratio (CR

This study aims to compare financial risk management between conventional and Shariah banks in Indonesia. Financial risk is measured using three key indicators: Net Interest Margin (NIM) as a proxy for market risk, Current Ratio (CR) for liquidity risk, and Non-Performing Loan (NPL) for credit risk. The study employs the Mann–Whitney U Test to examine differences between the two types of banks using a sample of conventional and Shariah banks registered in Indonesia. The results indicate no significant differences between conventional and Shariah banks in terms of NIM and CR, although Shariah banks exhibit a higher yet more volatile NIM and a more stable CR. However, a significant difference is found in NPL, where Shariah banks display higher NPL ratios than conventional banks. These findings suggest that although both types of banks differ in their approaches to managing market and liquidity risks, Shariah banks are more vulnerable to credit risk, as reflected in their higher NPL levels. This study is expected to provide insights for banks and regulators to enhance risk management in both banking systems and serve as a foundation for developing more effective risk management policies in the conventional and Shariah banking sectors.

Purpose- This study examines the predictive power of domestic and foreign Economic Policy Uncertainty (EPU) indices-specifically from the US, China, Europe, and globally-on the return and realized volatility (RV) of 20 global stock indices using monthly data spanning over 25 years. Methodology- The dynamic connectedness method is applied to analyze the spillover effects of EPUs across stock markets. Findings- The empirical results reveal that EPU impacts RV more significantly than returns, with Global and US EPUs emerging as primary drivers across most regions and periods. Notably, Chinese EPU consistently exhibits minimal influence, while local EPUs have pronounced effects in economies with heightened political, economic, and financial uncertainties. Contrary to expectations, EPUs from major trade partners and regional EPUs do not exhibit superior predictive power compared to Global and US EPUs. These insights are critical for investors, risk managers, and policymakers in optimizing strategies amidst evolving economic uncertainties. Conclusion- The findings indicate that Economic Policy Uncertainty (EPU) has a stronger influence on realized volatility (RV) than on stock returns, with Global and US EPUs serving as the dominant predictors across most regions and periods. In contrast, Chinese EPU consistently has minimal impact, while local EPUs play a significant role in countries with pronounced political and economic instability. Surprisingly, EPUs from major trade partners and regional EPUs do not outperform Global and US EPUs in predictive power. These insights underscore the importance of focusing on global and US-driven uncertainties for strategic decision-making by investors, risk managers, and policymakers. Keywords: Economic policy uncertainty (EPU), stock indices, return, realized variance, dynamic connectedness. JEL Codes: C32, C58, D80, G12, G17

Purpose: This study set out to investigate the effects of both external and internal factors on financial performance (FIP) in Pakistan's banking industry, with an emphasis on comparing the conventional and Islamic banking sectors. Data and Methodology: The sample of this study includes five leading Pakistani conventional banks and five Islamic banks. The study applied the OLS, fixed effect, or random effect model along with some pre-requisite diagnostic tests like descriptive statistics, correlation, and the Hausman test. Findings: The study's findings show that, whilst asset management, bank size, and liquidity have a positive and substantial association with the ROE of Islamic banks, liquidity and asset management have a positive link with the ROE of conventional banks. Furthermore, a positive and significant link was found between running Mushārakah and ROE, while a negative and significant relationship was found between diminishing Mushārakah and ROE. Significance: This study examines internal and external factors affecting the performance of top conventional and Islamic banks in Pakistan from 2016-2022, providing crucial insights into the effectiveness of Islamic banking for economic stability and progress. Implications: Policymakers, investors, and students of Islamic banking and finance, as well as the conventional and Islamic financial sectors, may all benefit from this research.

The volatility connectedness of the EU carbon market with commodity and financial markets in time- and frequency-domain: The role of the U.S. economic policy uncertainty

Purpose This study analyses the impact of the Covid-19 on stock market performance of BRICS nations together. BRICS countries comprise almost 30% of the global GDP and around 50% of the world’s economic growth. As BRICS nations have gained the attraction as financial investment destinations, their financial markets have apparently been as potential opportunities for foreign portfolio investors. While there is extensive research on the impact of the Covid-19 pandemic on individual economies and global financial markets, this paper is among the first to systematically investigate the dynamic connectedness of these emerging economies during the pandemic using the Time-Varying Parameter Vector Autoregressions (TVP-VAR) approach. Design/methodology/approach We categorise our data into two distinct periods: the pre-Covid period spanning from January 1, 2018, to March 10, 2020, and the Covid crisis period extending from March 11, 2020, to June 4, 2021. To achieve our research objectives, we employ the Time-Varying Parameter Vector Autoregressions (TVP-VAR) approach to assess dynamic connectedness. Findings Our findings reveal that among the BRICS nations, Brazil and South Africa serve as net transmitters of shocks, while China and India act as net receivers of shocks during the Covid crisis. However, the total connectedness index (TCI) has exhibited a notable increase throughout this crisis period. This paper makes several notable contributions to the academic literature by offering a unique focus on BRICS economies during the Covid-19 pandemic, providing practical insights for stakeholders, emphasising the importance of risk management and investment strategy, exploring diversification implications and introducing advanced methodology for analysing interconnected financial markets. Research limitations/implications The results have important implications for the investors, the hedge funds, portfolio managers and the policymakers in BRICS stock markets. The investors, investment houses, portfolio managers and policymakers can develop investment strategies and policies in the light of the findings of this study to cope up the future pandemic crisis. Originality/value This study is one of its kind that examines the dynamic connectedness of BRICS with recently developed TVP-VAR approach across pandemic crisis.

The effect of political and economic uncertainty on the cryptocurrency market

We use an extended joint connectedness technique and the time-varying parameter vector autoregression (ETVP-VAR) method to examine connections between the ARK FinTech Innovation ETF (ARKF), Global X FinTech ETF (FINX), and energy volatility by connectedness as a quality of eight indicators from April 1, 2019, to September 26, 2022. Our results demonstrate that the pattern of ARKF and FINX is picked up as a crucial net shock transmitter that nearly permeates our analyzed sample. Since the COVID-19 epidemic, more people are adopting FinTech partly because of their concern about the disease spreading through social contact and cash handling. Moreover, green bonds are net shock recipients over the long term. Furthermore, during the COVID-19 duration and the Russo-Ukrainian War, shocks transmitted to green bonds soared sharply. By contrast, keeping with the clean energy and crude oil trend, these indicators transmit a network of shocks during the period under study. When considering wind power, it becomes clear that this signal first acts as a net shock transmitter before changing into a net receiver of shocks from mid-2021 onwards. We recognize that the system is a net shock receiver regarding clean power. The dynamics invariably lead the series to change to a net shock transmitter in mid-2021. By mid-2021, the developments always cause the series to transform into a net shock transmitter.

We employ a time-varying parameter vector autoregression (TVP-VAR) combined with an extended joint connectedness approach to study interlinkages between renewable and nonrenewable energy consumption, economic growth, and CO2 emission by characterizing connectedness of four markets starting from 1985 to 2019. Our results demonstrate that the financial crisis appears to have influences on the system-wide dynamic connectedness, which reaches a peak during 1989. The total directional connectedness suggests that nonrenewable and renewable sources of energy consumption tend to be net recipients of spillover shocks. Throughout the studied period, growth in the economy and CO2 emissions seem to be influential net shock transmitters. Pairwise connectedness reveals that nonrenewable consumption primarily receives spillover effects of economic and environmental shocks. Since the crisis, CO2 emission has been a net receiver of shocks from other variables.

This study examines the dynamic return spillovers among major South Asian financial markets, including equity indices from India (NIFTY50R), Pakistan (KSER), and Sri Lanka (SLASPIR), as well as key global commodities such as Brent crude oil (BrentR) and gold (GoldR), and the relevant exchange rates (USDINR, USDPKR, and USDLKR). Using the Time-Varying Parameter Vector Autoregressive (TVP- VAR) connectedness approach, the analysis covers the period from March 2, 2005, to February 29, 2024, providing insights into how financial shocks propagate across these interconnected markets over nearly two decades. The findings reveal that the Indian equity market (NIFTY50R) and the Indian Rupee exchange rate (USDINR) serve as significant transmitters of shocks within the South Asian region, influencing other regional markets. Conversely, the Sri Lankan (SLASPIR) and Pakistani (KSER) equity indices are identified as net receivers of shocks, indicating their vulnerability to external financial disturbances. The study also highlights the pivotal role of Brent crude oil prices (BrentR) in driving spillovers, particularly affecting the Indian financial markets. The study's findings have significant implications for understanding the complexities of market interconnectedness in South Asia, particularly in the context of global economic integration.

This study investigates the transmission mechanism of Asia‐Pacific sovereign bond yields using a monthly data set, which reaches over the period from January 2003 until December 2017. Sovereign bond yields are decomposed into three latent factors – level, curvature and slope – using the dynamic Nelson–Siegel procedure proposed by Diebold and Li, Journal of Econometrics, 2006, 130(2), 337–364. The yield curve propagation mechanism is examined using the dynamic connectedness framework of Diebold and Yılmaz, Journal of Econometrics, 2012, 182(1), 119–134 and Diebold and Yılmaz, Journal of Econometrics, 2014, 182(1), 119–134 which is based on a time‐varying parameter vector auto‐regression (TVP‐VAR). The results suggest that the net transmitters of shocks are Australia, Hong Kong, Korea and Singapore whereas China, India, Indonesia, Japan and Malaysia have been net receivers of shocks. Across factors, those results are consistent except for the Korean curvature factor. In addition, findings revealed that the highest market interconnectedness can be found in the level factor followed by the slope and the curvature factor. Notably, all dynamic connectedness indices strongly increased during the Global Financial Crisis (2009), which illustrates that the Asia‐Pacific monetary policy is interconnected with each other especially during periods of economic unrest.