The relationships between time deposit rates, real rates, inflation and risk premium

Abstract

Purpose The purpose of this paper is to investigate the influence of the real interest rates, inflation and risk premium on the time deposit rates of banks in the dual banking system in Malaysia. Design/methodology/approach The data consists of 1-, 6- and 12-month average time deposit rates of conventional and Islamic banks over the period of January 2000 to June 2017. The cointegration methodologies are used to explore links between the time deposit rates, real rates, inflation and risk premium. The causality tests to test causality linkages between pairs of variables are also applied. The generalised forecast error variance decomposition based on the error correction model is conducted to analyse the impact of variables variation on the deposit rates. Findings The results show the presence of two cointegration vectors in the deposit rates, real rates, inflation and risk premium, for both conventional and Islamic bank rates. Causality tests reveal that deposit rates are caused by inflation and risk premium in a one-way causality. The results of variance decomposition highlight the importance of inflation and risk premium in explaining the variations in the bank deposit rates. For the conventional bank, inflation shocks play the most important role in explaining the movements of the deposit rates. In Islamic banks, the major determinant’s largest influence is the risk premium. Between the two bank rates, Islamic bank rates receive more influence from the explanatory variables in the long-run compared to conventional bank rates. The real rates have no noticeable effect on the variance of time deposit rates for both banks. Originality/value This study presents new evidence on the relationship between time deposit rates and the three explanatory variables, which are the real interest rates, inflation and risk premium, for both conventional and Islamic banks in Malaysia. The dual banking system allows exploring the similarities and differences between conventional and Islamic banks in Malaysia in terms of the linkages between the variables.

Green Accounting and Disclosure of Sustainability Report on Firm Values in Indonesia

“…Thus, applying green accounting makes it possible to see the impact of practicing sustainable business strategies. Looking at the current state of the environment, investors are not only interested in financial reports that explain company profits, but are also interested in companies that run a business that refers to environmental, social and business governance (ESG) principles [5].…”

Pengaruh Kurs terhadap Inflasi dan Harga Saham: Studi Kasus di Bank BTN

“…3 2021 Page 001(type by editor) DOI: 10.47153/afs14.2052021 *Corresponding Author menemukan efek asimetris dari harga minyak dan ketidakpastian kebijakan pada ekspektasi inflasi untuk guncangan positif dan negatif, dan untuk periode sebelum dan sesudah krisis keuangan, dimana secara khusus, hal-hal lain adalah sama, guncangan harga minyak dengan kekuatan yang sama memiliki pengaruh yang lebih besar terhadap ekspektasi inflasi pada periode pasca-krisis daripada pada periode sebelum krisis, dan selain itu, pada periode pasca krisis, guncangan harga minyak yang positif memiliki pengaruh yang lebih besar terhadap ekspektasi inflasi daripada guncangan harga minyak yang negatif. Lee et al (2020) menunjukkan adanya dua vektor kointegrasi pada suku bunga deposito, suku bunga riil, inflasi dan premi risiko, baik untuk suku bunga bank konvensional maupun syariah, dimana uji kausalitas mengungkapkan bahwa suku bunga deposito disebabkan oleh inflasi dan premi risiko dalam kausalitas satu arah. Hasil dekomposisi varians menyoroti pentingnya inflasi dan premi risiko dalam menjelaskan variasi suku bunga deposito bank.…”

“…Hasil dekomposisi varians menyoroti pentingnya inflasi dan premi risiko dalam menjelaskan variasi suku bunga deposito bank. Bagi bank konvensional, guncangan inflasi memegang peranan paling penting dalam menjelaskan pergerakan suku bunga suku bunga deposito dan di bank syariah, pengaruh terbesar determinan utama adalah premi risiko, dimana diantara kedua suku bunga bank, suku bunga bank syariah menerima pengaruh yang lebih besar dari variabel penjelas dalam jangka panjang dibandingkan dengan suku bunga bank konvensional, suku bunga riil tidak berpengaruh nyata terhadap varians suku bunga deposito di kedua bank (Lee et al, 2020). Li & Yuanchun (2019) dalam penelitiannya menunjukkan bahwa financial conditions index (FCI) dengan bobot yang bervariasi terhadap waktu berkinerja lebih baik daripada FCI dengan bobot tetap dan yang pertama lebih mencerminkan kondisi keuangan China, dan selanjutnya, kepastian ketersediaan kredit meningkatkan FCI.…”