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How does the cryptocurrency market affect the stock market performance in the MENA region?

Mina Sami (Economics, The American University, Cairo, Egypt)
Wael Abdallah (Management, The American University, Cairo, Egypt)

Journal of Economic and Administrative Sciences

ISSN: 2054-6238

Article publication date: 30 September 2020

Issue publication date: 22 October 2021

1767

Abstract

Purpose

This paper examines the impact of cryptocurrency market on the stock market performance in Middle East and North Africa (MENA) region. A comparative analysis is extended to distinguish this impact between Gulf countries and other economies in the region.

Design/methodology/approach

The analysis uses the information of cryptocurrencies and the stock market indices of the Gulf countries for the period 2014–2018 on a daily basis. Two strategies have been implemented to fulfill the goal of the study: first, the tests strategy, which is applied using the cointegration analysis and panel-specific forms of Granger causality; second, the regression strategy, which is applied mainly using the instrument variable with generalized method of moments (IV-GMM) method.

Findings

The results show that there is a significant relationship between the cryptocurrency market and the stock market performance in the MENA region. On the one hand, for the Gulf countries that claim full obedience to the Islamic Sharia rules, each 1% increase in the cryptocurrency returns reduces the stock market performance by 0.15%. On the other hand, for the non-Gulf (other MENA) countries that have flexibility in applying the Islamic Sharia rules or do not follow it, the stock market performance increases by 0.13%, for each 1% increase in the cryptocurrency returns.

Originality/value

The paper proposes two main contributions: First, the paper introduces the cryptocurrency returns as one of the determinants of the stock market performance in the MENA region. This impact is distinguished based on the degree of applying the Islamic Sharia rules and the vision of the government to the stock market. Second, the paper provides an empirical guideline for governments in the MENA region for efficient measures in their stock market, given the important expansion of the cryptocurrency market and the government type.

Keywords

Citation

Sami, M. and Abdallah, W. (2021), "How does the cryptocurrency market affect the stock market performance in the MENA region?", Journal of Economic and Administrative Sciences, Vol. 37 No. 4, pp. 741-753. https://doi.org/10.1108/JEAS-07-2019-0078

Publisher

:

Emerald Publishing Limited

Copyright © 2020, Emerald Publishing Limited

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