Etem Hakan, Ergeç and Bengül Gülümser, Arslan (2011): Impact of Interest Rates on Islamic and Conventional Banks: The Case of Turkey.
Download (306kB) | Preview
Identifying the impact of the interest rates upon Islamic banks is key to understand the contribution of such institutions to the financial stability, designing monetary policies and devising a proper risk management applicable to these institutions. This article analyzes and investigates the impact of interest rate shock upon the deposits and loans held by the conventional and Islamic banks with particular reference to the period between December 2005 and July 2009 based on Vector Error Correction (VEC) methodology. It is theoretically expected that the Islamic banks, relying on interest-free banking, shall not be affected by the interest rates; however, in concurrence with the previous studies, the article finds that the Islamic banks in Turkey are visibly influenced by interest rates.
|Item Type:||MPRA Paper|
|Original Title:||Impact of Interest Rates on Islamic and Conventional Banks: The Case of Turkey|
|English Title:||Impact of Interest Rates on Islamic and Conventional Banks: The Case of Turkey|
|Keywords:||Interest-free banking, monetary policy|
|Subjects:||E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy
G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages
|Depositing User:||etem hakan ergeç|
|Date Deposited:||04. Apr 2011 06:17|
|Last Modified:||13. Feb 2013 08:03|
Al-Jarhi, M. A. (2009) Islamic finance an efficient & equitable option, The. Islamic Research and Training Institute, Islamic Development Bank, Available at http://www.iefpedia.com/english/wp-content/uploads/2009/11/ ISLAMIC-FINANCE-AN-EFFICIENT-EQUITABLE-OPTION.pdf
Arslan, B. G. and Ergeç E. H. (2010) The efficiency of participation and conventional banks in Turkey: using data envelopment analysis IRJFE, 57, 156-168.
Asteriou, D. and Hall, S. G. (2007) Applied Econometrics: A Modern Approach, Revised edn., Palgrave Macmillan, New York.
Awan, A. G. (2009) Comparision of Islamic and conventional banking in Pakistan, in Proceedings 2nd CBRC, Lahore, Pakistan.
Bacha, O. I. (2004) Dual banking systems and. interest rate risk for Islamic. banks, MPRA Paper No. 12763.
Chapra, U. M. (1996). Monetary policy in an Islamic economy in Money and Banking in Islam, A. Iqbal and Khan (ed.), International Centre for Research in Islamic Economics and Islamabad: Institute of Policy Studies, Jeddah, pp.27-68.
Chong, B. S. and Liu, M.-H. (2009) Islamic banking: interest-free or interest-based?, Pacific-Basin Finance Journal 17, 125-144.
Darrat, A. F. (1988) The Islamic interest free banking system: some empirical evidences, Applied Economics. 20, 417-425.
Darrat, A. F. (2002) The relative efficiency of interest-free monetary system: some empirical evidence” The Quarterly Review of Economics and Finance, 42, 747-764.
Enders, W. (2004) Applied Econometric Time Series, 2nd edn, John Wiley&Sons Inc.
Erol, C. and El-Bdour, R. (1989) Attitudes, behaviour, and patronage factors of bank customers towards Islamic banks, International Journal of Bank Marketing, 7, 31-37.
Errico, L. and Farahbaksh, M. (1998) Islamic banking: issues in prudential regulations and supervision IMF Working Paper, No. 30.
Gerrard, P. and Cunningham, J. B. (1997) Islamic banking: a study in Singapore, International Journal of Bank Marketing, 15, 204-216.
Griffiths, W. E., Hill, R. C. and Lim, G. C. (2008), Using EViews for Principles of Econometrics, 3rd edn, John Wiley&Sons Inc.
Haron, S., Ahmad N., Planisek S.L. (1994) Bank patronage factors of Muslim and non-Muslim customers, International Journal of Bank Marketing, 12, 32-40.
Haron, S. and Shanmugam, B. (1997) Islamic Banking. System, Concepts and Applications, Pelanduk Publications. Singapore.
Haron, S. and Ahmad, N. (2000) The effects of conventional interest rates and rate of profits on funds deposited with Islamic banking system in Malaysia International Journal of Islamic Financial Services, 1, 1-7.
How, J. C,, Karim, M. A. and Verhoeven, P. (2005). Islamic financing and bank risk: the case of Malaysia. Thunderbird International Business Review, 47, 75-94.
Kaleem, A. and Isa, M. M. (2006) Islamic banking and money demand function in Malaysia: an econometric analysis, Pakistan Economic and Social Review, 44, 277-290.
Kasri, R. A. and Kassim, S. Hj. (2009) Empirical determinants of saving in the Islamic banks: evidence from Indonesia, Journal of King Abdulaziz University: Islamic Economics, 22, 181-201.
Kassim, S., Majid, M. A. and Yusof, R. M. (2009) Impact of monetary policy shocks on conventional and Islamic banks in a dual banking system: evidence from Malaysia, Journal of Economic Cooperation and Development, 30, 41-58.
Khan, M. S. and Mirakhor, A. (1989) The financial system and monetary policy in an Islamic economy, Journal of. King Abdulaziz University: Islamic Economics, 1, 39-57.
Khan, M. S. and Mirakhor, A. (1990) Islamic banking: experiences in The Islamic Republic of Iran and in Pakistan, Economic Development and Cultural Change, 38, 353-375.
Kia, A. (2002) Interest-free and interest-bearing money demand: policy invariance and stability, Working Paper. Department of Economics, Emory University.
Kia, A. and Darrat, A. F. (2007) Modeling money demand under the profit- sharing banking scheme: evidence on policy invariance and long-run stability, Global Finance Journal, 18, 104-123.
Metawa, S.A. and Almossawi, M. (1998) Banking behavior of Islamic bank customers: perspectives and implications, International Journal of Bank Marketing, 16, 299-313.
Naser, K., Jamal, A. and Al-Khatib, K. (1999) Islamic banking: a study of customer satisfaction and preferences in Jordan, International Journal of Bank Marketing, 17 135-151.
Nienhaus, V. (1983) Profitability of Islamic PLS banks competing with interest banks: problems and prospects, Journal of Research in Islamic Economics, 1, 31-39.
Okumuş, Ş. H. (2005) Interest–free banking in Turkey: a study of customer satisfaction and bank selection criteria, Journal of Economic Cooperation, 26, 51-86.
Participation Banks (2009). Publication of The Participation Banks Association of Turkey.
Rosly, S. (1999) Al-bay bithaman ajil financing: impacts on Islamic banking performance, Thunderbird International Business Review, 41, 461-480.
Said, F. and Ismail, A. G. (2008) Monetary policy, capital requirement and lending behaviour of Islamic banking in Malaysia, Journal of Economic Cooperation, 29, 1-22.
Sims, C. (1980) Macroeconomics and Reality, Econometrica, 48, 1-48.
Sukmana, R. and Kassim, S. H. (2010). Roles of the Islamic banks in the monetary transmission process in Malaysia, International Journal of Islamic and Middle Eastern Finance and Management, 3, 7-19.
Uzair, M. (1978) Central banking operations in an interest-free banking system, in Monetary and Fiscal Economics of Islam, Mohammad Ariff (ed.): International Centre for Research in Islamic Economics, Jeddah, pp. 211-235.
Van Schaik, D. (2001) Islamic banking, The Arab Bank Review, 3, 45-52.
Yudistira, D. (2004) Efficiency in Islamic banking: an empirical analysis of eighteen banks, Islamic Economic Studies, 12, 1-9.
Zaher, T. S. and Hassan, M. K. (2001) A comparative literature survey of Islamic finance and banking, Financial Markets, Institutions & Instruments 10, 155-199.
Zainol, Z. and Kassim S. H. (2010) An analysis of Islamic banks’ exposure to rate of return risk, Journal of Economic Cooperation and Development, 31, 59-84.
Zangeneh, H. and Salam, A. (1993). Central banking in an interest free banking system, Journal of. King Abdulaziz University: Islamic Economics, 5, 25-36.
Zarqa, M. A. (1983) Stability in an interest-free Islamic economy: a note, Pakistan Journal of Applied Economics, 11, 181-188.
Zuberi, H. A. (1992) Interest free banking and economic stability, The Pakistan Development Review, 31, 1077-1087.