Liquidity creation performance and financial stability consequences ofIslamic banking: Evidence from a multinational study

tDespite the growth of Islamic banks (IBs), little is known about their liquidity creation performance andfinancial stability consequences relative to conventional banks (CBs). We address these issues using datafrom 24 countries over 2000–2014. We find IBs create more liquidity per unit of assets than CBs, primarilyon the asset side of the balance sheet. Results are economically significant, econometrically robust, holdin high- and low-income countries, and during the Global Financial Crisis and other times. In addition,CB liquidity creation results in reduced national financial stability, particularly in high-income countries,whereas IB liquidity creation does not