Impact of Interest Rates on Islamic and Conventional Banks: The Case of Turkey
AbstractIdentifying 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.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 29848.
Date of creation: Jan 2011
Date of revision:
Interest-free banking; monetary policy;
Find related papers by JEL classification:
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-04-16 (All new papers)
- NEP-ARA-2011-04-16 (MENA - Middle East & North Africa)
- NEP-BAN-2011-04-16 (Banking)
- NEP-MAC-2011-04-16 (Macroeconomics)
- NEP-RMG-2011-04-16 (Risk Management)
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