Abstract
The objective of this paper is to empirically explore the dynamic inter- relationships between deposits of Islamic banks with monetary policy variables in Bahrain and Malaysia covering the period from January 2001 to June 2006. Both these countries are being dubbed as the worlds' largest International Islamic Financial Hubs (Qorchi, 2005). A comparative analysis between these two countries highlights the differences and similarities of the impact of monetary policy shocks on the Islamic banks' deposits. The analysis comprises of two major testing approaches. First, the auto-regressive distributed lag (ARDL) model is used to examine the long-run relationship among the variables. Second, the vector error-correction model (VECM) is adopted to explore the short- and long-run dynamics among the variables. Compared to the Malaysian Islamic banks' deposits, the study finds that the Islamic banks? deposits in Bahrain are sensitive to monetary policy changes. This implies that the Bahraini Islamic banks are less capable to offset the de- stabilizing impact of monetary policy as compared to its Malaysian counterpart.
Article Details
- Year: 2009
- Volume: 30
- Issue: 2
- Pages: 1 - 26
- Accepted: 01.03.2009
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DOI:
https://doi.org/10.5281/zenodo.20826588 -
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How to Cite?
Rosylin Mohd Yusof, Mohammed Al Wosabi, M. Shabri Abd. Majid (2009). Monetary Policy Shocks and Islamic Banks’ Deposits in a Dual Banking System: Empirical Evidence from Malaysia and Bahrain. Journal of Economic Cooperation and Development, 30(2), 1-26. https://doi.org/10.5281/zenodo.20826588
