The bank lending channel in the Malaysian Islamic and conventional banking system

Caporale, G.M.; Catik, A.N.; Helmi, M.H.; Ali, F.M.; Tajik, M.

doi:10.1016/j.gfj.2019.100478

The bank lending channel in the Malaysian Islamic and conventional banking system

Caporale, G.M.; Catik, A.N.; Helmi, M.H.; Ali, F.M.; Tajik, M.

Authors

G.M. Caporale

A.N. Catik

M.H. Helmi

F.M. Ali

M. Tajik

Abstract

This 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; however, the sub-sample estimation shows that its response has increased in more recent years becoming quite similar to that of conventional credit. Moreover, the relative importance of Islamic credit shocks in driving output growth is notable in the low growth regime, their effects being positive. These findings can be interpreted in terms of the distinctive features of Islamic banks.

Citation

Caporale, G., Catik, A., Helmi, M., Ali, F., & Tajik, M. (2020). The bank lending channel in the Malaysian Islamic and conventional banking system. Global Finance Journal, 45, Article 100478. https://doi.org/10.1016/j.gfj.2019.100478

Journal Article Type	Article
Acceptance Date	May 26, 2019
Online Publication Date	Jun 3, 2019
Publication Date	2020-08
Deposit Date	May 29, 2019
Publicly Available Date	Aug 18, 2020
Journal	Global Finance Journal
Print ISSN	1044-0283
Publisher	Elsevier
Peer Reviewed	Peer Reviewed
Volume	45
Article Number	100478
DOI	https://doi.org/10.1016/j.gfj.2019.100478
Public URL	https://durham-repository.worktribe.com/output/1300878

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Copyright Statement
© 2019 The Authors. Published by Elsevier Inc. This is an open access article under the CC BY license (http://creativecommons.org/licenses/BY/4.0/)