This empirical study examines the stability of Islamic banks during the subprime crisis. It covers a sample of fourteen Islamic banks and fourteen conventional banks. The conditional variance (volatility) of returns was used to measure stability. The E-GARCH and GJR-GARCH asymmetric models were...

A major factor behind this crisis is financialization of the system, with a growing disconnect between the monetary and the real sector. Some proponents of the Islamic finance claim such financial crisis would have been avoided, if asset-backed Islamic finance were adopted. However, while...

We investigate the differences in banks' responses to monetary policy shocks across bank size, liquidity, and type, i.e., conventional versus Islamic, in Pakistan between 2002:II to 2010:I. We find that following a monetary contraction, small banks with liquid balance sheets cut their lending...