The causality between returns of interest-based banks and Islamic banks: the case of Turkey

Etem Hakan Ergec (Department of Economics, Eskisehir, Osmangazi Universty, Eskisehir, Turkey)
Bengül Gülümser Kaytanci (Department of Economics, Anadolu Universitiy, Eskişehir, Turkey)

International Journal of Islamic and Middle Eastern Finance and Management

ISSN: 1753-8394

Publication date: 11 November 2014

Abstract

Purpose

This study aims to test whether the Islamic bank rate of returns are affected by the deposit rates of the interest-based bank in Turkey and whether they need to develop additional tools to manage it if they face an interest risk.

Design/methodology/approach

This study tests the causality between the Islamic bank rate of returns and the time deposit interest rates between 2002 and 2010 in Turkey by use of the Granger Causality method based on monthly data. The same analysis is repeated with respect to the terms before and after 2006.

Findings

It is concluded that for each term, the time deposit interest rates are the Granger cause of the Islamic bank rate of returns. This causality relation is more visible for the period after 2006.

Originality/value

The results shows that the Islamic banks are sensitive to the interest-based bank interest rates in Turkey. Therefore, this finding suggests that these banks need to remain cautious vis-à-vis the interest rate risk.

Keywords

Citation

Hakan Ergec, E. and Gülümser Kaytanci, B. (2014), "The causality between returns of interest-based banks and Islamic banks: the case of Turkey", International Journal of Islamic and Middle Eastern Finance and Management, Vol. 7 No. 4, pp. 443-456. https://doi.org/10.1108/IMEFM-07-2014-0072

Publisher

:

Emerald Group Publishing Limited

Copyright © 2014, Emerald Group Publishing Limited

To read the full version of this content please select one of the options below

You may be able to access this content by logging in via Shibboleth, Open Athens or with your Emerald account.
To rent this content from Deepdyve, please click the button.
If you think you should have access to this content, click the button to contact our support team.