The Behavior of Conventional and Islamic Bank Deposit Returns in Malaysia and Turkey

Author/Editor:

Joshua Charap ; Serhan Cevik

Publication Date:

July 1, 2011

Electronic Access:

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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

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.

Series:

Working Paper No. 2011/156

Subject:

Bank deposits Banking Deposit rates Financial services Financial statements Islamic banking National accounts Public financial management (PFM) Return on investment

English

Publication Date:

July 1, 2011

ISBN/ISSN:

9781455293704/1018-5941

Stock No:

WPIEA2011156

Pages:

23

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