This study draws a comparison between the Global Financial Crisis (GFC) and the COVID-19 pandemic crisis to assess the safehaven potential of Islamic stocks for G7 stock markets. We employ the cross-quantilogram framework of Han et al., which considers the non-linearity in the relationship, and thus captures the correlation between the Islamic and G7 stock markets across various quantiles reflecting different market conditions. The analysis also includes the time-varying cross-quantile correlation to observe the evolution of Islamic stocks' safe-haven potential. Our full sample analysis shows that Islamic stocks do not exhibit safe-haven properties for G7 stock markets. During the GFC period, Islamic stocks show some diversification benefits for the G7 stock markets. Notably, Islamic stocks emerged as a robust safe-haven asset for the G7 stock markets during the pandemic crisis. The study carries essential insights for equity investors and regulators of G7 and other countries to implement diversification/hedging strategies that would involve Islamic stocks to protect equity investments and the overall financial system amid the financial downturns.
Exchange rate policy to improve external competitiveness has
now become the centre piece of any adjustment effort. It is expected
that a nominal devaluation will result in expenditure switching,
increased production of tradeable, higher exports, and in an improvement
of the external accounts of the country in question. Recently, the
traditional stabilisation packages, and especially their devaluation
component, have come under attack by a number of authors.! It has been
argued that devaluation can be counterproductive because exports and
imports are relatively insensitive to price and exchange rate changes,
especially in developing and semi-industrialised countries.2.3 If the
price elasticities of imports and exports are sufficiently low, the
trade balance expressed in domestic currency may worsen. Grubel (1976)
has argued that a country's persistent payments imbalances can be due
only to faulty monetary policy and cannot be corrected by either
devaluation (exchange rate policy) or the use of fIscal policy. In a
recent article, Miles (1979) claims to have provided the requisite
evidence to support Grubel's argument. Miles (1979) shows that
devaluation does not improve the trade balance but improves the balance
of payments. This results implies that the improvement comes through the
capital account.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.