This article contributes to the literature on the relationship between financial development and economic growth in three ways: it utilizes recently developed techniques for generalized methods of moments (GMM) one-step estimation with dynamic panel models, it focuses exclusively on a sample of developing countries and it uses as proxies for financial development variables which capture both banking sector and stock market effects. The results provide evidence, based on a panel of annual data for 30 developing countries, that while the stock market variables are positively and significantly related to growth, their presence results in the standard banking sector variables, credit to the private sector and liquid liabilities, having negative effects on growth.

In the literature on the growth-financial development relationship, many different measures of financial development have been suggested. These are generally highly correlated and are frequently subject to measurement error. In this article, principal components are used as a means of measuring financial development. Using panel data for 30 developing countries on 10 measures of financial development, the properties of the principal components are discussed and their relationships with growth are examined. Estimation by the general method of moments suggests that principal components have a useful role in examining the links between growth and financial development.

This paper forecasts the response of Islamic banks’ dynamics (size, profitability, nonperforming financing, and stability) to the COVID-19 pandemic over the period ranging from 2019Q4 to 2021Q4. Nine jurisdictions are considered based on their Islamic banks’ systemic importance, namely Bahrain, Brunei, Indonesia, Kuwait, Malaysia, Pakistan, Saudi Arabia, Turkey, and UAE. Using the bivariate VARX model, our forecasting exercise shows that the Islamic banks’ response to the COVID-19 pandemic is not uniform across jurisdictions. While the Islamic banks’ dynamics in Saudi Arabia, UAE, and Kuwait are less likely to be impaired, Bahrain, Brunei, Malaysia, Pakistan, and Turkey are expected to be relatively more affected especially in terms of their size growth. Saudi Arabia will continue leading the growth momentum of the global Islamic banking sector, and its Islamic banks’ assets are expected to reach at least $185.4 billion by the end of the fourth quarter of 2021. This paper recommends a prioritization approach for the implementation of the policy measures by the jurisdictions based on their banks-specific responses to the COVID-19 pandemic.

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Purpose This paper aims to investigate the volatility transmission across stocks, gold and crude oil markets before and during the novel coronavirus (COVID-19) crisis. Design/methodology/approach A multivariate vector autoregression (VAR)-Baba, Engle, Kraft and Kroner generalized autoregressive conditional heteroskedasticity model (BEKK-GARCH) is used to assess volatility transmission across the examined markets. The sample is divided as follows. The first period ranging from 02/01/2019 to 10/03/2020 defines the pre-COVID-19 crisis. The second period is from 11/03/2020 to 05/10/2020, representing the COVID-19 crisis period. Then, a robustness test is used using exponential GARCH models after including an exogenous variable capturing the growth of COVID-19 confirmed death cases worldwide with the aim to test the accuracy of the VAR-BEKK-GARCH estimated results. Findings Results indicate that the interconnectedness among the examined market has been intensified during the COVID-19 crisis, proving the lack of hedging opportunities. It is also found that stocks and Gold markets lead the crude oil market especially during the COVID-19 crisis, which explains the freefall of the crude oil price during the health crisis. Similarly, results show that Gold is most likely to act as a diversifier rather than a hedging tool during the current health crisis. Originality/value Although the recent studies in the field focused on analyzing the relationships between different markets during the first quarter of 2020, this study considers a larger data set with the aim to assess the volatility transmission across the examined international markets Amid the COVID-19 crisis, while it shows the most significant impact on various financial markets compared to other diseases.