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Asymmetrical effects of macro variables on commercial bank deposits: evidence from Maldives based on NARDL

Author

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  • Latheef, Udhula Abdul
  • Masih, Mansur

Abstract

The study investigates the asymmetrical effects of macroeconomic performance variables (if any) on other depository corporations. Maldives is taken as a case study. The variables selected for macroeconomic presentation are Trade Balance, Exchange Rate, Consumer Price Index, Broad Money Supply (M2) and Interest Rate, while for other depository corporations the proxy used is commercial deposits. Monthly data are taken from statistical publications supplied by Maldives Monetary Authority website from January 2007 to December 2016. Understanding the deposit behaviour to macroeconomic changes is crucial for financial corporations as it serves to generate much needed loans for the required parties. The significance of this study, unlike the previous studies is, to the best of my knowledge, that this is the first attempt made to test the existence of any asymmetry through Nonlinear Auto-Regressive Distributed Lag model developed by Shin et al. (2014). Also, this research is the first such examination on commercial deposits behaviour in response to macroeconomic variables in the Maldives. In order to find any non-linearity between the variables in long run and short run, the variables are decomposed into both positive and negative components applying nonlinear ARDL approach. Findings tend to indicate that only the short run interest rates to commercial deposits signify asymmetrical relationship unlike all other macroeconomic variables including both long and short-run variables confirming that most macroeconomic variables have symmetrical (linear) relationship with commercial deposits in the Maldives.

Suggested Citation

  • Latheef, Udhula Abdul & Masih, Mansur, 2017. "Asymmetrical effects of macro variables on commercial bank deposits: evidence from Maldives based on NARDL," MPRA Paper 86361, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:86361
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    References listed on IDEAS

    as
    1. Raza, Naveed & Jawad Hussain Shahzad, Syed & Tiwari, Aviral Kumar & Shahbaz, Muhammad, 2016. "Asymmetric impact of gold, oil prices and their volatilities on stock prices of emerging markets," Resources Policy, Elsevier, vol. 49(C), pages 290-301.
    2. Granger, Clive W.J. & Gawon Yoon, 2002. "Hidden Cointegration," Royal Economic Society Annual Conference 2002 92, Royal Economic Society.
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    4. Fadzlan SUFIAN & Muzafar Shah HABIBULLAH, 2009. "Bank specific and macroeconomic determinants of bank profitability: Empirical evidence from the China banking sector," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 4(2), pages 274-291, June.
    5. 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.
    6. Valentina Flamini & Miss Liliana B Schumacher & Mr. Calvin A McDonald, 2009. "The Determinants of Commercial Bank Profitability in Sub-Saharan Africa," IMF Working Papers 2009/015, International Monetary Fund.
    7. Granger, Clive W.J. & Gawon Yoon, 2002. "Hidden Cointegration," Royal Economic Society Annual Conference 2002 92, Royal Economic Society.
    8. Mansur Masih & Ali Al-Elg & Haider Madani, 2009. "Causality between financial development and economic growth: an application of vector error correction and variance decomposition methods to Saudi Arabia," Applied Economics, Taylor & Francis Journals, vol. 41(13), pages 1691-1699.
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    Cited by:

    1. Ufuk CAN & Zeynep Gizem CAN & Süleyman DEĞİRMEN, 2019. "Paranın Dolaşım Hızının ve Para Talebi Fonksiyonunun Ekonometrik Analizi: Türkiye Örneği," Istanbul Business Research, Istanbul University Business School, vol. 48(2), pages 218-247, November.

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    More about this item

    Keywords

    Bank deposits; macroeconomic variables; nonlinear ARDL;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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