Advanced Search
MyIDEAS: Login to save this article or follow this journal

Interest Rates Uncertainty, Immediacy Cost and the Role of Banks

Contents:

Author Info

  • Shamshubaridah Ramlee

    ()
    (Faculty of Economics and Business, Universiti Kebangsaan Malaysia, 43600 Bangi, Selangor, Malaysia)

  • Nor Azlan Ghazali

    (Faculty of Economics and Business, Universiti Kebangsaan Malaysia, 43600 Bangi, Selangor, Malaysia)

Registered author(s):

    Abstract

    This study developed the Role of Banks Index (RBX) to characterize the role of banks in delivering its services in an uncertain interest rate and immediate fund requirement environment. We extend the model developed by Ramlee (2001) and Deshmukh, Greenbaum, and Kanatas (1983) by incorporating an element of immediacy costs. The basis of the immediacy cost is in the manner a bank stock up funds as inventory to cater for a loan commitment made to its customer. The strategy adopted in the pooling of funds acts as a penalty cost for borrowing in the last minute. RBX characterizes a banking firm with two possible roles: being a broker when the RBX moved towards 1 and an asset transformer when the RBX moved towards 0. The study successfully operationalized the developed RBX by using a monthly three months KLIBOR rate as a proxy of the uncertain interest rates environment and λ, as the proxy for immediacy costs for the period of 1982 to 2005. We showed that banks act as an asset transformer in an uncertain interest rate and high immediacy costs environment but more as a broker in a stable environment.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://web.usm.my/journal/aamjaf/vol2-2/2-2-4.pdfFile-Format:Application/pdf
    Download Restriction: no

    Bibliographic Info

    Article provided by Penerbit Universiti Sains Malaysia in its journal Asian Academy of Management Journal of Accounting and Finance.

    Volume (Year): 2 (2006)
    Issue (Month): 2 ()
    Pages: 61-74

    as in new window
    Handle: RePEc:usm:journl:aamjaf00202_61-74

    Contact details of provider:
    Web page: http://web.usm.my/aamj/
    More information through EDIRC

    Related research

    Keywords: asset transformer; broker; immediacy costs; Role of Bank Index (RBX); loan commitment; uncertain interest rate;

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:usm:journl:aamjaf00202_61-74. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journal Division).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.