IDEAS home Printed from https://ideas.repec.org/a/ids/afasfa/v7y2017i1p65-83.html
   My bibliography  Save this article

Dynamic relation between Islamic and conventional lending rates in Malaysia

Author

Listed:
  • Siew-Peng Lee
  • Noor Azryani Auzairy
  • Mansor Isa
  • Chee-Keong Choong

Abstract

Conceptually, the Islamic and conventional banking rates are supposedly determined based on different premises, and empirical evidence appears to suggest that they are closely related. However, the findings are not unanimous. This paper offers Malaysian evidence of the extent of relatedness between Islamic and conventional lending rates in a dual-banking system. Our data consists of two pairs of Islamic and conventional lending rates: the base lending rates and the average lending rates. To test the relation, we use the standard methodologies of the Johansen cointegration, Granger causality, variance decomposition, and impulse response function. Our results indicate that there is no long-run relation between the Islamic and conventional lending rates for base lending rates; however, the average lending rates do indicate a cointegration between them. In the short-run the averages are independent. In general it may be concluded that Islamic borrowing may be considered a viable alternative to conventional bank borrowing.

Suggested Citation

  • Siew-Peng Lee & Noor Azryani Auzairy & Mansor Isa & Chee-Keong Choong, 2017. "Dynamic relation between Islamic and conventional lending rates in Malaysia," Afro-Asian Journal of Finance and Accounting, Inderscience Enterprises Ltd, vol. 7(1), pages 65-83.
    • Handle: RePEc:ids:afasfa:v:7:y:2017:i:1:p:65-83
    as

    Download full text from publisher

    File URL: http://www.inderscience.com/link.php?id=82929
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    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:ids:afasfa:v:7:y:2017:i:1:p:65-83. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sarah Parker (email available below). General contact details of provider: http://www.inderscience.com/browse/index.php?journalID=214 .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.