IDEAS home Printed from https://ideas.repec.org/a/bjz/ajisjr/1507.html

The Impact of Interest Rate on Bank Deposit: Evidence from the Albanian Banking Sector (Jan 2005 – Dec 2014)

Author

Listed:
  • Altin Turhani
  • Hysen Hoda

Abstract

This paper focuses on analyzing the Relationship between Interest Rates and the level of deposits in the Albanian banking sector. High interest rate should affect the bank customers to become more willing to deposit their funds there. While, low interest rate should discourage them. The paper consists in analyzing the effects of variables to identify the progress of the deposits in the period 2005- 2014. The data are sourced from the Central Bank of Albania and the Institute of Statistics. The model of study has as dependent variable level of deposits, while the explanatory variables are the deposit interest rate and Gross Domestic Product (GDP). Meanwhile, ordinary Least square (OLS) is used as the statistical method to analyze the data. The result of the paper indicates that interest rates have a significant impact in explaining the level of deposits over the years. In addition, interest rates on foreign currency deposits have a positive impact, assessing the level of growth in foreign currency deposits in the banking system during period 2005-2014. This study recommends that banks should be careful in attracting the depositors; banks should give them full information and educate on interest rates for depositing funds in banks.

Suggested Citation

  • Altin Turhani & Hysen Hoda, 2016. "The Impact of Interest Rate on Bank Deposit: Evidence from the Albanian Banking Sector (Jan 2005 – Dec 2014)," Academic Journal of Interdisciplinary Studies, Richtmann Publishing Ltd, vol. 5, July.
    • Handle: RePEc:bjz:ajisjr:1507
    DOI: 10.5901/ajis.2016.v5n2p257
    as

    Download full text from publisher

    File URL: https://www.richtmann.org/journal/index.php/ajis/article/view/9418
    Download Restriction: no
    File URL: https://www.richtmann.org/journal/index.php/ajis/article/view/9418/9095
    Download Restriction: no
    File URL: https://libkey.io/10.5901/ajis.2016.v5n2p257?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 24(Win), pages 14-23.
    2. Waldo, Douglas G., 1985. "Bank runs, the deposit-currency ratio and the interest rate," Journal of Monetary Economics, Elsevier, vol. 15(3), pages 269-277, May.
    3. Flannery, Mark J, 1998. "Using Market Information in Prudential Bank Supervision: A Review of the U.S. Empirical Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(3), pages 273-305, August.
    4. Cook, Douglas O & Spellman, Lewis J, 1994. "Repudiation Risk and Restitution Costs: Toward Understanding Premiums on Insured Deposits," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(3), pages 439-459, August.
    5. Xavier Vives, 2006. "Banking and Regulation in Emerging Markets: The Role of External Discipline," The World Bank Research Observer, World Bank, vol. 21(2), pages 179-206.
    6. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    7. Mr. Roberto Steiner & Mr. Adolfo Barajas, 2000. "Depositor Behavior and Market Discipline in Colombia," IMF Working Papers 2000/214, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mohammed Musa Adamu & Abdulaziz Aliyu, 2025. "An Investigation of Interest Rate Sensitivity on Borrowing Behaviour of Individuals, Firms and Businesses in Access Bank Plc," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 9(1), pages 4843-4850, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Allen Berger & Rima Turk-Ariss, 2015. "Do Depositors Discipline Banks and Did Government Actions During the Recent Crisis Reduce this Discipline? An International Perspective," Journal of Financial Services Research, Springer;Western Finance Association, vol. 48(2), pages 103-126, October.
    2. Molyneux, Philip & Upreti, Vineet & Zhou, Tim, 2023. "Depositor market discipline: New evidence from selling failed banks," International Review of Financial Analysis, Elsevier, vol. 89(C).
    3. Quintero-V, Juan C., 2023. "Deposit insurance and market discipline," Journal of Financial Stability, Elsevier, vol. 64(C).
    4. Altin Turhani & Hysen Hoda, 2016. "The Determinative Factors of Deposits Behavior in Banking System in Albania (Jan 2005 – Dec 2014)," Academic Journal of Interdisciplinary Studies, Richtmann Publishing Ltd, vol. 5, July.
    5. Semenova Maria, 2007. "How depositors discipline banks: the case of Russia," EERC Working Paper Series 07-02e, EERC Research Network, Russia and CIS.
    6. Carlos Budnevich L. & Helmut Franken M., 2003. "Market Discipline in Depositors’ Behavior and the Role of Risk-Rating Agencies: The Case of Chile," Journal Econom a Chilena (The Chilean Economy), Central Bank of Chile, vol. 6(2), pages 45-70, August.
    7. Javier Gómez‐Biscarri & Germán López‐Espinosa & Andrés Mesa‐Toro, 2022. "Drivers of depositor discipline in credit unions," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 93(4), pages 849-885, December.
    8. Pierluigi Bologna, 2015. "Structural Funding and Bank Failures," Journal of Financial Services Research, Springer;Western Finance Association, vol. 47(1), pages 81-113, February.
    9. Martinez Peria, Maria Soledad & Schmukler, Sergio L., 1999. "Do depositors punish banks for"bad"behavior? : market discipline in Argentina, Chile, and Mexico," Policy Research Working Paper Series 2058, The World Bank.
    10. Abhiman Das & Saibal Ghosh, 2004. "Market Discipline In The Indian Banking Sector: An Empirical Exploration," Finance 0410020, University Library of Munich, Germany.
    11. Asli Demirguc-Kunt & Edward J. Kane, 2002. "Deposit Insurance Around the Globe: Where Does It Work?," Journal of Economic Perspectives, American Economic Association, vol. 16(2), pages 175-195, Spring.
    12. De Bandt, Olivier & Hartmann, Philipp, 2000. "Systemic risk: A survey," Working Paper Series 35, European Central Bank.
    13. Imai, Masami, 2006. "Market discipline and deposit insurance reform in Japan," Journal of Banking & Finance, Elsevier, vol. 30(12), pages 3433-3452, December.
    14. Höwer, Daniel, 2016. "The role of bank relationships when firms are financially distressed," Journal of Banking & Finance, Elsevier, vol. 65(C), pages 59-75.
    15. Apanard P. Prabha & Clas Wihlborg & Thomas D. Willett, 2012. "Market Discipline for Financial Institutions and Markets for Information," Chapters, in: James R. Barth & Chen Lin & Clas Wihlborg (ed.), Research Handbook on International Banking and Governance, chapter 13, Edward Elgar Publishing.
    16. Suarez, Javier & Sánchez Serrano, Antonio, 2018. "Approaching non-performing loans from a macroprudential angle," Report of the Advisory Scientific Committee 7, European Systemic Risk Board.
    17. Stijn Claessens & M. Ayhan Kose, 2013. "Financial Crises: Explanations, Types and Implications," CAMA Working Papers 2013-06, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    18. anonymous, 1999. "Using subordinated debt as an instrument of market discipline," Staff Studies 172, Board of Governors of the Federal Reserve System (U.S.).
    19. Eaton, J., 1994. "Cross-Border Banking," Papers 26, Boston University - Department of Economics.
    20. Demirguc-Kunt, Asli & Huizinga, Harry, 1999. "Market Discipline and Financial Safety Net Design," CEPR Discussion Papers 2311, Centre for Economic Policy Research.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bjz:ajisjr:1507. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Richtmann Publishing Ltd (email available below). General contact details of provider: https://www.richtmann.org/journal/index.php/ajis .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.