Role of Islamic Banking during COVID-19 on Political and Financial Events: Application of Impulse Indicator Saturation

Ghulam Ghouse,Aribah Aslam,Muhammad Ishaq Bhatti

doi:10.3390/su132111619

Abstract

This paper attempts to detect the unavoidable impacts of COVID-19 on geopolitical and financial events related to Islamic banking and the finance sector in Pakistan. It considers only those major events that triggered imbalances in the equity prices of selected Islamic banks. Employed here is the GARCH model, used to predict the volatility series using daily data from January 2007 to July 2020. The Impulse Indicator Saturation (IIS) helps to identify the structural breaks due to COVID-19, as well as the effects of political and financial events on the returns and volatility series of Islamic banks. The results indicate that all the events due to COVID-19 are significant. While 19 out of 21 political and financial events impacted the returns and volatility series, there were only 2 political events out of 18 that showed no significant effect on the returns and the volatility series. The state’s and Islamic banks’ policymakers can use these results to build an effective and sustainable financial policy regarding Islamic finance and the banking sector.

Highlights

It is well known that equity markets play a significant role in the economic progress of any country, in advanced economies
The results reveal the significant impact of all political and financial events on the returns of BIPL and Meezan Bank Limited (MEBL), except the ban on TV channels going to air on 14 November 2007, and the PGOp of 14 November 2007 and on the 10 June 2010
The stock markets play a critical role in any economy

Summary

Introduction

It is well known that equity markets play a significant role in the economic progress of any country, in advanced economies. An economy without an equity market cannot improve equity funding accessibility or attain a stable financial structure. When the investors invest their money in share-buying instead of saving, it leads to the wise use of assets. The reason for this is that the money that can be consumed is mobilized and conveyed to endorse business activity. It brings about changes in all related sectors, such as industry, commerce, and agriculture, leading to economic growth and better efficiency and profitability for firms

Methods

Results

Conclusion