The Bank Lending Channel in a Dual Banking System: Evidence from Malaysia

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Abdurrahman Nazif ÇatıkEge University, Turkey Mohamad Husam HelmiBrunel University London Faek Menla AliBrunel University London Mohammad TajikBrunel University London March 2016 AbstractThis paper examines the bank lending channel of monetary transmission in Malaysia, a country with a dual banking system including both Islamic and conventional banks, over the period 1994:01-2015:06. A two-regime threshold vector autoregression (TVAR) model is estimated to take into account possible nonlinearities in the relationship between bank lending and monetary policy under different economic conditions. The results indicate that Islamic credit is less responsive than conventional credit to interest rate shocks in both the high and low growth regimes. By contrast, the relative importance of Islamic credit shocks in driving output growth is much greater in the low growth regime, their effects being positive. These findings can be interpreted in terms of the distinctive features of Islamic banks.

Financing Channels and Monetary Policy in a Dual Banking System: Evidence from Islamic Banks in Indonesia

“…The findings also suggest that no significant difference exists between Islamic bank financing and conventional bank lending behaviour with respect to interest rates and monetary policy. On the other hand, studies by Caporale and Helmi () and Caporale et al () examine the bank‐lending channel of monetary transmission in dual banking system − Malaysia. The results indicate that Islamic credit is less responsive than conventional credit to interest rate shocks in both the high and low growth regimes.…”

Maqasid Al-Shariah Philosophy in Monetary Regime Towards Inclusive Sustainable Growth

“…The modern Muslim scholars who contributed to the discussion on monetary policy in Islam include Siddiqi (1981), Kahf (1981Kahf ( , 2006, Chapra (1981Chapra ( , 1985Chapra ( , 1990Chapra ( , 1995, Uzair (1990), Choudhury (1997Choudhury ( , 2005Choudhury ( , 2009, Choudhry & Mirakhor (1997), Anjum (2007, Toutounchian (2004Toutounchian ( , 2006Toutounchian ( , 2009, Yusof, Wosabi, & Majid (2009), Sukmana& Kassim (2010), Ismal (2010Ismal ( , 2011Ismal ( , 2013, Mat Sari & Mirakhor (2012), Zaheer (2012), Leith, Moldovan, & Rossi (2012), Rama (2013), Izadi & Izadi (2013), Ergeç&Arslan (2013), Putriani (2014), Z. Hasan (2008Hasan ( , 2011Hasan ( , 2016, Muhammad, Ab Rahman, & Azam Sulaiman (2014), Ariff (2014), Uddin & Halim (2015), Zaman(2015), Caporale, Çatık, Helmi, Ali, & Tajik, (2016), Awad & Soliman (2016), Hossain (2016), Al-Jarhi (1981, 2002, Uddin (2016), (Ahmad & Ismail, 2017) and (Yunus, 2018).…”

Malaysia’s economic success story and challenges

“…Within three decades, Malaysia has developed a competitive, liberal and globally recognised Islamic finance ecosystem that operates alongside the conventional financial system, accounting for approximately one sixth of global Islamic finance activities (Figure 11). Domestic Islamic banking assets have expanded rapidly, with the share of total banking assets rising from just 0.07% in 1994 to 26.8% by end-2015 (Caporale et al, 2016). This compares with a share in Turkey of 5.2% in 2015.…”