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The mudharabah deposit rate behaviour in relation to the conventional deposit rate

This study examines the relationship between the conventional and mudharabah deposit rates of Malaysian banks in two separate periods — between January 1996 and September 2004, and between October 2004 and June 2011 — which signify the implementation of a framework for calculating the Islamic bank d...

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Main Authors: Radziah Abdul Latiff,, Noreha Halid,
Format: Article
Language:English
Published: Penerbit Universiti Kebangsaan Malaysia 2012
Online Access:http://journalarticle.ukm.my/6379/1/Fast_color_scan_to_a_PDF_file_5.DOC
http://journalarticle.ukm.my/6379/
http://www.ukm.my/penerbit/jurus.htm
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spelling my-ukm.journal.63792013-07-01T07:32:00Z http://journalarticle.ukm.my/6379/ The mudharabah deposit rate behaviour in relation to the conventional deposit rate Radziah Abdul Latiff, Noreha Halid, This study examines the relationship between the conventional and mudharabah deposit rates of Malaysian banks in two separate periods — between January 1996 and September 2004, and between October 2004 and June 2011 — which signify the implementation of a framework for calculating the Islamic bank deposit rate and the profit equalization reserve (PER). Employing the autoregressive distributed lagged (ARDL) approach, this study finds the two rates to be cointegrated in the first period similar to previous findings. However, for the second period, there is largely no evidence of a long-term relationship. The significance of this finding is that in the second period, when Islamic banks employ a regulated PER as a displacement risk mitigating mechanism, Islamic banks do not benchmark against conventional rates. They possibly engage in income smoothing for economic efficiency or for signalling purposes. An important policy implication is that PER and any type of reserve to smooth income, that is regulated, may be prescribed as it may have a positive behavioural effect. Penerbit Universiti Kebangsaan Malaysia 2012-12 Article PeerReviewed application/msword en http://journalarticle.ukm.my/6379/1/Fast_color_scan_to_a_PDF_file_5.DOC Radziah Abdul Latiff, and Noreha Halid, (2012) The mudharabah deposit rate behaviour in relation to the conventional deposit rate. Jurnal Pengurusan, 36 . pp. 59-68. ISSN 0127-2713 http://www.ukm.my/penerbit/jurus.htm
institution Universiti Kebangsaan Malaysia
building Perpustakaan Tun Sri Lanang Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Kebangsaan Malaysia
content_source UKM Journal Article Repository
url_provider http://journalarticle.ukm.my/
language English
description This study examines the relationship between the conventional and mudharabah deposit rates of Malaysian banks in two separate periods — between January 1996 and September 2004, and between October 2004 and June 2011 — which signify the implementation of a framework for calculating the Islamic bank deposit rate and the profit equalization reserve (PER). Employing the autoregressive distributed lagged (ARDL) approach, this study finds the two rates to be cointegrated in the first period similar to previous findings. However, for the second period, there is largely no evidence of a long-term relationship. The significance of this finding is that in the second period, when Islamic banks employ a regulated PER as a displacement risk mitigating mechanism, Islamic banks do not benchmark against conventional rates. They possibly engage in income smoothing for economic efficiency or for signalling purposes. An important policy implication is that PER and any type of reserve to smooth income, that is regulated, may be prescribed as it may have a positive behavioural effect.
format Article
author Radziah Abdul Latiff,
Noreha Halid,
spellingShingle Radziah Abdul Latiff,
Noreha Halid,
The mudharabah deposit rate behaviour in relation to the conventional deposit rate
author_facet Radziah Abdul Latiff,
Noreha Halid,
author_sort Radziah Abdul Latiff,
title The mudharabah deposit rate behaviour in relation to the conventional deposit rate
title_short The mudharabah deposit rate behaviour in relation to the conventional deposit rate
title_full The mudharabah deposit rate behaviour in relation to the conventional deposit rate
title_fullStr The mudharabah deposit rate behaviour in relation to the conventional deposit rate
title_full_unstemmed The mudharabah deposit rate behaviour in relation to the conventional deposit rate
title_sort mudharabah deposit rate behaviour in relation to the conventional deposit rate
publisher Penerbit Universiti Kebangsaan Malaysia
publishDate 2012
url http://journalarticle.ukm.my/6379/1/Fast_color_scan_to_a_PDF_file_5.DOC
http://journalarticle.ukm.my/6379/
http://www.ukm.my/penerbit/jurus.htm
_version_ 1643736743413809152
score 13.211869

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