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Author/Editor:
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Cevik, Serhan ; Charap, Joshua
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Publication Date:
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July 01, 2011
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Electronic Access:
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Free Full text
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.
The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
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Summary:
This paper examines the empirical behavior of conventional bank deposit rates and the rate of return on retail Islamic profit-and-loss sharing (PLS) investment accounts in Malaysia and Turkey, using monthly data from January 1997 to August 2010. The analysis shows that conventional bank deposit rates and PLS returns exhibit long-run cointegration and the time-varying volatility of conventional bank deposit rates and PLS returns is correlated and is statistically significant. The pairwise and multivariate causality tests show that conventional bank deposit rates Granger cause returns on PLS accounts. These findings have policy implications in terms of price stability and financial stability.
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Order a print copy
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Series:
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Working Paper No. 11/156
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Subject(s):
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Banking | Cross country analysis | Interest rates | Islamic banking | Malaysia | Profit margins | Turkey
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Author's Keyword(s):
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Interest rates | Islamic banks | causality | time-varying volatility correlation |
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