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

Author

Listed:
  • Serhan Cevik

    (International Monetary Fund, 700 19th Street, N.W. Washington, D.C. 20431, USA)

  • Joshua Charap

    (International Monetary Fund, 700 19th Street, N.W. Washington, D.C. 20431, USA.)

Abstract

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.

Suggested Citation

  • Serhan Cevik & Joshua Charap, 2015. "The Behavior of Conventional and Islamic Bank Deposit Returns in Malaysia and Turkey," International Journal of Economics and Financial Issues, Econjournals, vol. 5(1), pages 111-124.
    • Handle: RePEc:eco:journ1:2015-01-09
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Interest rates; Islamic banks; causality; time-varying volatility correlation;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E49 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Other
    • F59 - International Economics - - International Relations, National Security, and International Political Economy - - - Other
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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