IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/29848.html
   My bibliography  Save this paper

Impact of Interest Rates on Islamic and Conventional Banks: The Case of Turkey

Author

Listed:
  • Etem Hakan, Ergeç
  • Bengül Gülümser, Arslan

Abstract

Identifying 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.

Suggested Citation

  • Etem Hakan, Ergeç & Bengül Gülümser, Arslan, 2011. "Impact of Interest Rates on Islamic and Conventional Banks: The Case of Turkey," MPRA Paper 29848, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:29848
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/29848/1/MPRA_paper_29848.pdf
    File Function: original version
    Download Restriction: no

    References listed on IDEAS

    as
    1. Bacha, Obiyathulla I., 2004. "Dual Banking Systems and Interest Rate Risk for Islamic Banks," MPRA Paper 12763, University Library of Munich, Germany, revised Mar 2004.
    2. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
    3. Raditya Sukmana & Salina H. Kassim, 2010. "Roles of the Islamic banks in the monetary transmission process in Malaysia," International Journal of Islamic and Middle Eastern Finance and Management, Emerald Group Publishing, vol. 3(1), pages 7-19, April.
    4. Habib A. Zuberi, 1992. "Interest Free Banking and Economic Stability," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 31(4), pages 1077-1087.
    5. Chong, Beng Soon & Liu, Ming-Hua, 2009. "Islamic banking: Interest-free or interest-based?," Pacific-Basin Finance Journal, Elsevier, vol. 17(1), pages 125-144, January.
    6. Yudistira, Donsyah, 2004. "Efficiency In Islamic Banking: An Empirical Analysis Of Eighteen Banks," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 12, pages 2-19.
    7. Kia, Amir & Darrat, Ali F., 2007. "Modeling money demand under the profit-sharing banking scheme: Some evidence on policy invariance and long-run stability," Global Finance Journal, Elsevier, vol. 18(1), pages 104-123.
    8. Khan, Mohsin S & Mirakhor, Abbas, 1990. "Islamic Banking: Experiences in the Islamic Republic of Iran and in Pakistan," Economic Development and Cultural Change, University of Chicago Press, vol. 38(2), pages 353-375, January.
    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. Rafi, Umar & Masih, Mansur, 2014. "Are Islamic Banks Truly Shariah Compliant? An Application of Time Series Multivariate Forecasting Techniques to Islamic Bank Financing," MPRA Paper 57711, University Library of Munich, Germany.
    2. Ahmet F. Aysan & Mustafa Disli & Huseyin Ozturk, 2017. "Bank Lending Channel In A Dual Banking System:Why Are Islamic Banks So Responsive?," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 17/938, Ghent University, Faculty of Economics and Business Administration.
    3. Seho, Mirzet & Alaaabed, Alaa & Masih, Mansur, 2016. "Risk-Sharing Financing of Islamic Banks: Better Shielded Against Interest Rate Risk?," MPRA Paper 82558, University Library of Munich, Germany.
    4. Mushtaq, Saba & Siddiqui, Danish Ahmed, 2016. "Effect of interest rate on bank deposits: evidences from Islamic and non-Islamic economies," MPRA Paper 69245, University Library of Munich, Germany.
    5. repec:spr:fininn:v:2:y:2016:i:1:d:10.1186_s40854-016-0028-7 is not listed on IDEAS
    6. Tariq, Anam & Masih, Mansur, 2016. "Risk-sharing deposits in islamic banks: do interest rates have any influence on them?," MPRA Paper 71680, University Library of Munich, Germany.
    7. Saba Mushtaq & Danish Ahmed Siddiqui, 2016. "Effect of interest rate on economic performance: evidence from Islamic and non-Islamic economies," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 2(1), pages 1-14, December.

    More about this item

    Keywords

    Interest-free banking; monetary policy;

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:pra:mprapa:29848. 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: (Joachim Winter). General contact details of provider: http://edirc.repec.org/data/vfmunde.html .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.