Bank competition and interest rate pass-through in the BRICS

Fadiran, Gideon

doi:10.1108/ijoem-05-2011-0046

Cited by 3 publications

(1 citation statement)

References 23 publications

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“…Some of the researchers have studied the banking sector in various regions. For example, Perera et al (2010) investigated the bank concentration and interest rate spread in South Asian region, whereas Fadiran (2014) has studied bank competition and interest rate pass-through in emerging economies of BRICS countries (Brazil, Russia, India, China, and South Africa). Recently, Yusof et al (2015) have investigated the link between Modaraba profit and interest rates of 18 Islamic banks in GCC countries and found no significant link in the long run.…”

Section: Literature Reviewmentioning

confidence: 99%

Determinants of deposits in conventional and Islamic banking: a case of an emerging economy

Akhtar

Akhter

Shahbaz

2017

Int Journal of Emerging Mkts

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Purpose -The purpose of this paper is to examine the impact of base lending rate (BLR), consumer prices, gross domestic product, money supply (M 3 ), Karachi stock exchange composite index, KIBOR, and profit rate of Islamic banks on deposits of both conventional and Islamic banks in Pakistan. Design/methodology/approach -Quarterly data of six years (2006)(2007)(2008)(2009)(2010)(2011) are obtained from 30 banks, consisting of 25 conventional and five Islamic banks. The short-run as well as long-run relationships among these variables are examined by utilizing advanced time series approach. Bounds testing and autoregressive distributed lag have been used to examine cointegration and error correction framework for short-run dynamics. Findings -The empirical results reveal that variables such as interest rate of conventional banks, profit of Islamic banks, consumer prices, M 3 , and BLR have different impact on conventional and Islamic bank deposits. Depositors of conventional and Islamic banks are sensitive to the returns received on deposits. A boost in interest rate increases the deposits of conventional banks but decreases those of Islamic banks. Originality/value -This study signifies that customers of Islamic banks are motivated by profit. This indicates the normal behavior of customers, hence endures the substitution effect in conventional system. The study has important implications for Islamic banks to offer more competitive rates of profit with respect to the interest rate of conventional banks in order to collect more deposits. It also identifies relevant policy implication for the central bank of the country.

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Section: Literature Reviewmentioning

confidence: 99%

Determinants of deposits in conventional and Islamic banking: a case of an emerging economy

Akhtar

Akhter

Shahbaz

2017

Int Journal of Emerging Mkts

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Capital market openness and volatility: an investigation of five Sub-Saharan treasury bill rates

Charteris

Strydom

2016

International Journal of Emerging Markets

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Purpose – The purpose of this paper is to model the volatility of treasury bill (T-bill) rates in five Sub-Saharan capital markets to investigate whether or not differences in capital mobility affect volatility. Design/methodology/approach – Primary data was collected from weekly T-bill auctions in five Sub-Saharan countries and was analysed using a range of Generalised Autoregressive Conditional Heteroscedasticity (GARCH) models in order to determine the volatility characteristics of each of these instruments. Differences in the institutional arrangements for each market are used to interpret the results of the econometric analysis. Findings – Evidence is presented that indicates that the size and financial liberalisation of capital markets affect volatility. While the markets with the greatest exposure to international investors exhibit greater volatility in the long-run, the presence of non-residents in the market appears to contribute to more efficient pricing of these instruments. Research limitations/implications – The limited sample restricts the ability to generalise these findings, however, the finding that differences exist in the volatility of these markets even though they are geographically similar indicates the value of this methodological approach. Practical implications – The finding that greater capital mobility may result in increased volatility and greater efficiency has significant policy implications for governments and market regulators who have to weigh the costs and benefits of financial liberalisation. Originality/value – The paper employs a unique data set to model the volatility characteristics of the selected T-bills to improve the understanding of the behaviour of these important instruments in Sub-Saharan frontier markets. More specifically the study provides a novel empirical approach to addressing the question of whether capital mobility is linked to increased volatility. The finding that capital mobility is linked to greater market efficiency offers a fresh insight to this debate.

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Loom of Symmetric Pass-Through

Şahin

2019

Economies

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This paper analyzes the effects of the real policy interest rate on the banking sector lending rate, the deposit rate, real stock prices, and the real exchange rate using the Engle Granger cointegration method (EG), the vector error-correction model (VECM), and the nonlinear vector error-correction model (NVECM) with monthly Turkish data over the period January 2002–April 2018. (1) EG results indicate bivariate cointegration relationships between the real interest rate, lending rates, and the deposit rate. The real interest rate increases all lending rates, mainly the housing rate. However, the long-run coefficient for the real exchange rate is not statistically significant. The pass-through is higher for the deposit rate than for lending rates. Moreoever, real stock prices shrink substantially where the finance sector has been affected the most. (2) VECM results indicate a cointegration relationship between all the variables except for the real exchange rate, which has a statistically non-significant pass-through coefficient. The real interest rate has a noteworthy long-run positive effect on the housing loans lending rate compared to others. The affirmative effect on real stock prices is the highest for the technology sector. The short-run effect of the real interest rate on lending rates, real stock prices and the real exchange rate are statistically non-significant except for the overall stock price index, and the vehicle loans lending rate which has a higher coefficient than the deposit rate. (3) NVECM results allow testing of eleven hypotheses and highlight the symmetric relationship and the valid pass-through effect, and reject the strong exogeneity assumption for all variables.

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Bank competition and interest rate pass-through in the BRICS

Cited by 3 publications

References 23 publications

Determinants of deposits in conventional and Islamic banking: a case of an emerging economy

Determinants of deposits in conventional and Islamic banking: a case of an emerging economy

Capital market openness and volatility: an investigation of five Sub-Saharan treasury bill rates

Loom of Symmetric Pass-Through

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