World economy and islamic finance : comparison of government policies during the global financial crisis and the COVID-19 Crisis

Abstract EN

-COVID-19 has changed our lives and the way how business, social interacting, and healthcare is delivered like nothing else in modern history.

This study aims to extend the growing body of literature on the topic of the COVID-19 crisis by critically analyzing and comparing government responses to the COVID-19 crisis in 2020, and the global financial crisis (GFC) in 2008.

It focuses on investigating the similarities and differences in size, scope, structure, and timing of government policies between the two.

Government policies and responses of the United States and China, as the main players in the global economy, are being analyzed in depth.

What we seek to examine is whether governments have actually learnt their lessons and used their knowledge from the GFC to fight the COVID-19 crisis.

We also analyze impacts of government measures on the stock market indices, S&P 500 and Shanghai Composite (SSEC).

Our analysis shows that governments’ response to the COVID-19 crisis is quicker and more proficient than it was in the GFC.

One of the effects of the COVID-19 crisis is the increased stock market volatility.

Indeed, we found increased volatility of Dow Jones Islamic Market World Index (DJIM) in the COVID-19 period, compared to pre-crisis period.

Our analysis also shows that DJIM performs much better in the COVID-19 crisis compared to the GFC, i.e., returns are positive and volatility of DJIM returns is significantly lower in the COVID-19 crisis than it was in the GFC.

Islamic finance answers to the recent economic turmoil can be in public-private partnerships.

Sharīʿahcompliant instruments could be used to raise private capital for infrastructure projects