Macro-financial linkages in Egypt: A panel analysis of economic shocks and loan portfolio quality

We examine the interest rate sensitivity of both deposits and credits at Islamic and conventional banks in Turkey. We find that the bank lending channel is especially operative for Islamic banks. Impulse responses for conventional and Islamic banks reveal that Islamic bank depositors’ sensitivity to policy rate changes is substantially larger than that of conventional bank depositors. Next to heavily dependence on deposit funding, we consider that inertia in Islamic bank deposit rates impedes these banks to keep those depositors who consider the opportunity cost of monetary policy rates is unbearable. On the lending side, we obtain similar results, implying that tight monetary policy leads to a larger contraction in Islamic bank credits. This finding is a reflection of the favourable attitude of Islamic banks towards small and medium‐sized enterprise (SME) financing. When similar relationships are analysed for currency and inflation shocks, we again find larger responses for Islamic banks showing the cyclical nature of SME credits.

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“… See Demiralp and Demiralp () and Love and Turk Ariss () for similar variable transformations in their VAR framework. …”

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confidence: 99%

Bank lending channel in a dual banking system: Why are Islamic banks so responsive?

2017

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“…The panel VAR model developed by Holtz-Eakin et al (1988) and Love and Zicchino (2006) is applied to the data. This is a technique that combines the traditional VAR approach, for which all variables in the system are considered endogenous, and panel data allowing for unobserved individual heterogeneity (Love & Zicchino 2006;Love & Ariss 2014). Likewise, the framework of the panel VAR allows for endogenous relationships among the variables that enter a system of equations, within which short-run dynamic relationships may later be identified (Koutsomanoli-Filippaki & Mamatzakis 2009).…”

Section: Panel Varmentioning

confidence: 99%

Big‐box Retailers, Retail Employment, and Wages in the Us

Peralta¹,

Kim

2019

Rev Urban & Reg Develop

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This paper examines the dynamic interrelationship between the presence of big‐box retailers and retail employment and wages in the United States at county level for 1986–2005 using panel vector autoregressions (Panel VAR). The Panel VAR approach addresses endogenous interactions among the variables in the system. In other words, this approach takes into account the fact that the presence of big‐box retailers can have an impact on retail employment and wages and at the same time, retail employment and wages can influence the presence of big‐box retailers. Results indicate that the presence of big‐box retailers has a positive effect on employment but a negative effect on wages. The effect on wages is relatively greater and is more prolonged than the effect on employment. Both employment and wages have an instant (first year) positive effect on the presence of big‐box retailers, which implies that big‐box stores are located in areas where the economy is growing.

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“…Diamond (1991) derived the existence of a positive relationship between the movement in the overall LQ and the loan rate. Love and Ariss (2014) found that an increase in GDP and growth in capital inflows led to improvements in banks' loan portfolio quality; on the other hand, high lending rates generate adverse selection problems, and portfolio quality will go down, thus increasing credit risk. The theoretical explanation shows that LQ plays a major part in credit risk and should be taken into account when making CRM policies.…”

Section: Loan Qualitymentioning

confidence: 99%

Credit risk management

Akram¹,

Rahman²

2018

IJIF

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Purpose -This study aims to examine and compare the credit risk management (CRM) scenario of Islamic banks (IBs) and conventional banks (CBs) in Pakistan, keeping in view the phenomenal growth of Islamic banking and its future implications.Design/methodology/approach -A sample of five CBs and four IBs was chosen out of the whole banking industry for the study. Secondary data obtained from the banks' annual financial reports for 13 years, starting from 2004 to 2016, were analyzed. Multiple regression, correlation and descriptive analysis were used in the examination of the data.Findings -The results show that loan quality (LQ) has a positive and significant impact on CRM for both IBs and CBs. Asset quality (AQ), on the other hand, has a negative impact on CRM in the case of IBs, but has a significantly positive relation with CRM in the case of CBs. The impact of 16 ratios measuring LQ and AQ have also been individually checked on CRM, by making use of a regression model using a dummy variable of financial crises for robust comparison among CBs and IBs. The model proved significant, and CRM performance of IBs was observed to be better than that of CBs. Moreover, the mean average value of financial ratios used as a measuring tool for these variables shows that the CRM performance of IBs operating in Pakistan was better than that of CBs over the period of the study.Practical implications -The research findings are expected to facilitate bankers, investors, academics and policy makers to build a better understanding of CRM practices as adopted by CBs and IBs. The findings would be useful in formulating policy measures for the progress of the banking industry in Pakistan.Originality/value -This research is unique in terms of its approach toward analyzing and comparing CRM performance of CBs and IBs. Such work has not been carried out before in the Pakistani banking industry.

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Macro-financial linkages in Egypt: A panel analysis of economic shocks and loan portfolio quality

Cited by 75 publications

References 25 publications

Bank lending channel in a dual banking system: Why are Islamic banks so responsive?

Bank lending channel in a dual banking system: Why are Islamic banks so responsive?

Big‐box Retailers, Retail Employment, and Wages in the Us

Credit risk management

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