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Causal linkages between the energy sector and islamic regional indexes: evidence from GCC, EU, US, emerging markets and Asia-pacific

Malayan, Firoz and Masih, Mansur (2017): Causal linkages between the energy sector and islamic regional indexes: evidence from GCC, EU, US, emerging markets and Asia-pacific.

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Abstract

The purpose of this paper is to investigate the Granger-causal relationship between conventional energy sector index and Islamic regional indexes of GCC, EU, U.S., Emerging markets and Asia-pacific. Also, the causality among U.S, China and the energy sector will be studied. The standard time series techniques are employed. The empirical results tend to indicate that there exists a Granger-causality from the GCC to the Islamic regional indexes and the conventional energy sector. The results also show that the U.S has the most leading position followed by the energy sector when taking China into context. Both the generalized variance decompositions and impulse response functions confirm the direction of causality. These findings have important policy implications for the regions and countries concerned. The Islamic regional indexes should monitor the trend of the Islamic GCC region, closely, while taking the conventional energy sector into account. The U.S. and the energy sector still have an influence over the Chinese oil and gas sectors.

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