Three essays on important characteristics of Islamic and conventional banks in a dual banking system

This thesis investigates bank liquidity creation and overnight interbank markets in a dual banking system by conducting three studies. The first study examines the relationship between risk preference and bank liquidity creation, which is supported by empirical evidence. The second study finds that the Islamic and conventional overnight interbank markets are integrated and both markets contribute to the price discovery process. Both Islamic and conventional overnight interbank rates are found to be rigid in the third study. However, Islamic rate is more rigid than the conventional rate.