The roles of domestic and foreign Islamic banks in Malaysian monetary transmission

Abstract

If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services.Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. AbstractPurpose -The aim of this paper is to empirically test the presence of the bank lending channel for the Islamic banking system in Malaysia. Design/methodology/approach -Distributional effects from monetary policy changes were analyzed by three bank characteristics such as size, liquidity and capital. Using the econometric model by Kashyap and Stein (1995), the implementation of a policy contraction leads to reduction in loan supply because some banks may not able to offset a reduction in deposits. The paper explores the response shown between domestic and foreign Islamic banks in Malaysia using bank-level data from 2005 to 2010. Findings -The empirical result indicates presence of the bank lending channel in the Islamic banking system in Malaysia, size and liquidity as sources of difference response of financing supply in domestic bank and capital for foreign Islamic bank and Islamic interbank rate as an efficient tool in conducting monetary policy especially in the Islamic banking system. Originality/value -The paper manages to explore the effectiveness of Islamic the monetary policy tools in the Islamic Banking system in Malaysia. Using Islamic interbank rate as a policy tool, it provides valuable view to policy makers, who are analyzing for efficiency of transmission channel.

Analisis Tinjauan Bibliometrik Pada Literatur Sistem Moneter Islam

“…bank syariah dan juga tingkat margin PLS. 8 Dalam kasus ini bank-bank syariah dikasifikasikan berdasarkan ukuran (aset dan modal), dan tingkat likuiditas bank. Kemudian dibedakan pula antara bank syariah domestik dengan bank syariah asing.…”

Sukuk and monetary policy transmission in Indonesia: the role of asset price and exchange rate channels

“…However, Islamic banks' balance sheet items are relatively more sensitive to monetary policy changes than the conventional banks' balance sheet items . Through the bank lending channel, the domestic and foreign Islamic banks were found to be an efficient tool in the monetary policy conduct in Malaysia (Muhammad et al, 2014). Meanwhile, Mohseni and Cao (2020) investigated the effectiveness of monetary policy (inflation) on economic growth by modelling two assets and three assets.…”

“…The above-reviewed studies only investigated the relevance of Islamic banking channel (Kassim andMajid, 2008, 2009;Sukmana and Kassim, 2010;Muhammad et al, 2014;Kassim, 2014, 2015) and ignored the role of the Islamic capital market of sukuk in the monetary policy transmission mechanism. Meanwhile, Selim (2015) only provided conceptual monetary policy channels without providing empirical evidence on the relevance of sukuk in monetary policy transmission.…”

“…However, the Islamic banks' balance sheet items were relatively more sensitive to monetary policy changes than the conventional banks' balance sheet items . The domestic bank and capital for foreign Islamic banks and Islamic interbank rate are found as efficient tools in conducting monetary policy in the Malaysian Islamic banking system (Muhammad et al, 2014). Rashid et al (2020) and Kassim (2014, 2015) also documented that with the presence of Islamic banks, the monetary policy implementation becomes more effective in the Malaysian economy.…”

“…In addition, many previous studies have investigated the relevance of Islamic bank in monetary policy transmission channel (Kassim andMajid, 2008, 2009;Sukmana and Kassim, 2010;Muhammad et al, 2014;Kassim, 2014, 2015) and documented the importance of Islamic bank in the economic development agenda. Previous studies on the conceptual of sukuk (Zulkhibri, 2015) as one of the Islamic monetary instruments (Hossain, 2019), its monetary policy transmission channels (Selim, 2015) through asset price (Suriani, Majid et al, 2018 confirmed the essential role of sukuk as one of Islamic monetary transmission channels in the economies of Indonesia (Mahomed et al, 2018), Gulf cooperation countries (Said and Grassa, 2013) and worldwide (Smaoui and Nechi, 2017;Ahmad et al, 2012;Echchabi et al, 2016).…”