Asymmetrical effects of macro variables on commercial bank deposits: evidence from Maldives based on NARDL

Latheef, Udhula Abdul and Masih, Mansur (2017): Asymmetrical effects of macro variables on commercial bank deposits: evidence from Maldives based on NARDL.

Abstract

The study investigates the asymmetrical effects of macroeconomic performance variables (if any) on other depository corporations. Maldives is taken as a case study. The variables selected for macroeconomic presentation are Trade Balance, Exchange Rate, Consumer Price Index, Broad Money Supply (M2) and Interest Rate, while for other depository corporations the proxy used is commercial deposits. Monthly data are taken from statistical publications supplied by Maldives Monetary Authority website from January 2007 to December 2016. Understanding the deposit behaviour to macroeconomic changes is crucial for financial corporations as it serves to generate much needed loans for the required parties. The significance of this study, unlike the previous studies is, to the best of my knowledge, that this is the first attempt made to test the existence of any asymmetry through Nonlinear Auto-Regressive Distributed Lag model developed by Shin et al. (2014). Also, this research is the first such examination on commercial deposits behaviour in response to macroeconomic variables in the Maldives. In order to find any non-linearity between the variables in long run and short run, the variables are decomposed into both positive and negative components applying nonlinear ARDL approach. Findings tend to indicate that only the short run interest rates to commercial deposits signify asymmetrical relationship unlike all other macroeconomic variables including both long and short-run variables confirming that most macroeconomic variables have symmetrical (linear) relationship with commercial deposits in the Maldives.

• Item Type: MPRA Paper
• Language: English
• Keywords: Bank deposits, macroeconomic variables, nonlinear ARDL
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C58 - Financial Econometrics; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages

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