Top PDF Empirical Research on Rate of Return, Interest Rate and Mudharabah Deposit

Empirical Research on Rate of Return, Interest Rate and Mudharabah Deposit

Empirical Research on Rate of Return, Interest Rate and Mudharabah Deposit

2.1. Islamic Bank The primary and most vital feature of Islamic banks is that the prohibition of interest (riba), no matter its form or source. The prohibition of riba in Islamic social science has received a lot of attention. Several western studies have urged that the prohibition of interest is associated with degreeti-capitalist and an obstacle to the correct functioning of a contemporary economy and a prejudicious issue to economic development and growth [4]. [5] pointed out that for the conventional financial institution, the bottom lending charge (BLR) and prices of return on deposits would adjust according to alterations inside the industry fascination level. A rise on the market curiosity fee would cause the rate of return on deposits to increase. For the reason that Islamic bank is featuring lower deposit rates, it is unable to compete with the conventional bank in attracting new deposits. Consequently, the speed of progress of new deposits will have a tendency to decline. Simultaneously, depositors who would like to get benefit from the higher interest rates will transfer their deposits from the Islamic bank to the conventional financial institution. Customers may want to help keep their deposits for shorter length. Generally, the volume of Islamic deposits could be negatively influenced. The above rationalization theoretically exhibits that any change in the market interest rates would produce a shifting effect from Islamic bank to the conventional financial institution and vice versa.
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Analisis Faktor-faktor yang Mempengaruhi Equivalent Rate Of Return Bagi Hasil Deposito Mudharabah

Analisis Faktor-faktor yang Mempengaruhi Equivalent Rate Of Return Bagi Hasil Deposito Mudharabah

Kata kunci : Equivalent Rate of Return Bagi hasil deposito Mudharabah ,FDR, CAR, ROA, ROE,NPF, BOPO, Pembiayaan Mudharabah Abstract This research was conducted to analyze the factors affecting the equivalent rate of return for mudharabah deposit proceeds at Syariah Commercial Bank, as well as to know and test empirically the influence of FDR, CAR, ROA, ROE, NPF, BOPO and Mudharabah Financing, both simultaneously or partial to the equivalent rate of return for the proceeds of mudharabah deposits. This study uses secondary data of Sharia Commercial Banks in the period January 2010 to June 2015 with descriptive and verification methods. The analysis was done by multiple linear regression using EViews 7. The results showed that simultaneously, the FDR, CAR, ROA, ROE, NPF, BOPO and Mudharabah Financing variables significantly influence the Equivalent Rate of Return on Mudharabah Deposits Returns with contribution contribution of 71,38%. While partially ROE and Mudharabah Financing variables significantly influence positively to the equivalent rate of return for mudharabah deposit proceeds. While FDR, CAR, ROA, NPF and BOPO did not significantly influence the equivalent rate of return for mudharabah deposit
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Influence Level of Indonesian Bank Interest Rate and Profit Sharing to Growth of Time Deposit Mudharabah at Islamic Banking in Indonesia

Influence Level of Indonesian Bank Interest Rate and Profit Sharing to Growth of Time Deposit Mudharabah at Islamic Banking in Indonesia

According to some contemporary views, a Muslim who invests his funds will not be taxed on the amount of funds that have been invested. Conversely, he will be taxed on profits generated from the investment, because in the Islamic economy all assets not utilized are taxed. It would be better if Muslim investors utilize their funds for investment rather than not utilizing at all. In general, people now prefer to deposit their money rather than saving money, arguing that the benefits are greater, although it also has big enough risk. It is clear that investment in Islamic economy is a function of the level of expected return.
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Bank mergers and deposit interest rate rigidity

Bank mergers and deposit interest rate rigidity

The theoretical foundation of the analysis of bank retail interest rate rigidity’s determinants follows the tradition of adjustment costs theories of price dynamics (Sheshinski and Weiss, 1977, Rotemberg and Saloner, 1987). These theories argue that the decision of a firm to change its price (or a bank to change its retail rates) is driven by the trade-off between the costs of adjusting the price and the costs of deviating from a typically unobservable optimal price. In this framework bank and market structure characteristics, such as bank size, geographical scope, distribution of market shares, can significantly affect the probability of retail interest rate changes since they affect both the adjustment costs and the optimal price. Empirical research supports these theoretical insights by finding a statistically and economically significant impact of variables such as market concentration, bank size, etc. on the probability of changing bank retail interest rates (Hannan and Berger 1991, Mester and Sounders 1995, Craig and Dinger 2010). Existent empirical research, however, has only been focused on a static view of bank and market structure and ignores the information contained in their dynamics.
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Does conventional interest rate influence islamic deposit rate of return or the other way around ? evidence from Malaysia

Does conventional interest rate influence islamic deposit rate of return or the other way around ? evidence from Malaysia

also examine whether base lending rate also affects the performance of Islamic deposits. To the best of the author knowledge, this paper differs from the previous studies in terms of the econometric techniques used especially the Long Run Structural Modelling, Error Correction Model and Variance Decomposition. The remainder of this paper is organized as follows. Section 2 reviews the relevant literature, while Section 3 discusses the data and methodology. Section 4 presents the empirical results and discusses the findings and, finally, Section 5 concludes and explains the policy implication.
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Empirical Testing of Exchange Rate and Interest Rate Transmission Channels in China

Empirical Testing of Exchange Rate and Interest Rate Transmission Channels in China

3. CONCLUSION In this paper we have studied the exchange and interest rate pass-through channels in China. First, the Granger causality test results show that the exchange rate and the Shanghai composite index return have a causal effect on both imports and exports. As to the interest rate channel, the results show that the deposit rate, lending rate, and Shanghai composite index return have causal effects on PPI. Second, the results of Johansen’s cointegration show a long-run relationship between the exchange rate and exports. On the other hand, we also find that both the deposit rate and the Shanghai composite index have a long-run equilibrium relationship with the Producer Price Index. Third, in the impulse response function, a sustained negative shock to the level of the exchange rate and the Shanghai composite index return induces a sustained decrease in the level of imports and exports. A sustained positive shock to the level of the deposit rate, lending rate, and the Shanghai composite index return induces a sustained decrease in the level of PPI. On the other hand, in the variance decomposition, we note that the exchange rate affects the variance of imports and exports. The deposit and lending rates also affect the variance of PPI.
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Search Costs, Decision Avoidance and Deposit Interest Rate Setting

Search Costs, Decision Avoidance and Deposit Interest Rate Setting

This research question is addressed using both theoretical and empirical approaches. First a model is presented to determine the interest rates and number of deposit products used by banks wishing to profit from customers’ unwillingness to change deposit services. Customers are assumed to have different propensities to switch deposits accounts according to how they discount the costs and benefits of changing deposit accounts. It is predicted if banks are aware of such consumer behaviours, they maximise profits by introducing new products with competitive rates for customers prepared to switch accounts, and reducing interest rates on existing deposit products for customers who avoid switching deposit accounts. The model predictions are empirically tested using data on UK saving deposit accounts interest rates and characteristics over a 12 year period. A large number of highly uncompetitive deposit accounts are observed with profit making institutions using more duplicate products than non-profit institutions. Further the relationships between deposit interest rates and a) the type of institution, b) the number of deposit accounts and c) the age of the deposit account are examined and all observed to be positive and statistically significant.
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THE INFLUENCE OF INTEREST RATE RISK ON THE PERFORMANCE OF DEPOSIT MONEY BANKS IN NIGERIA

THE INFLUENCE OF INTEREST RATE RISK ON THE PERFORMANCE OF DEPOSIT MONEY BANKS IN NIGERIA

CONCLUSION Interest rate risk is a major financial risk capable of influencing bank performance. Banks handle assets and liabilities and mismatching of assets and liabilities peculiar among Nigerian banks expose them to interest rate risk. As result, this study examined the influence interest rate risk has on DMBs in Nigeria, taking the case of 6 Tier 1 capital banks. Individually, each measure of interest rate risk had no statistically significant effect on return on assets; thus, all are not determining cause of bank performance. The R 2 value of 0.45 is weak; thus, affirming that interest rate risk does not have substantial effect on bank performance. On the basis of the aforementioned, it is concluded that interest rate risk wields no significant influence on the performance of DMBs in Nigeria. The limitations of the current study are that it was restricted to banks having Tier 1 capital and it used only three measures of interest rate risk; hence, further studies should consider Tier 2 capital banks and incorporate more measures of interest rate risk in their empirical model.
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Deposit Interest Rate Calculator

Deposit Interest Rate Calculator

86 construction loan for 87 longer payday loans 88 cash cheque instantly 89 direct lender for bad credit. 90 vericrest financial loan modification 91 loan graduate[r]

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The Rate of Interest or the Rate of Return: Estimating Intertemporal Elasticity of Substitution

The Rate of Interest or the Rate of Return: Estimating Intertemporal Elasticity of Substitution

Yet, a researcher must exercise some caution. Our task is not to see whether we can generate unambiguously “good” estimates of the parameters of a consumption Euler equation. Rather we only intend to investigate whether the use of the total composite net real rate as a measure of return yields different results than those obtained from single asset measures of return. Accordingly, we employ the conventional CES model used in early tests and substitute the composite return for the rate of return variables used in earlier studies. It is probable that using our total composite return with some other assumption about utility would produce better (worse) results; but experimenting with other utility functions is not our goal. Our experiments do not use any new technique, complicated utility functions or require panel data. Our estimated equations are the same as the relatively simple linear and nonlinear equations (derived from Euler equation (4)) that were standard in most of the tests of models undertaken earlier, namely:
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The Real Interest Rate: An Empirical Investigation

The Real Interest Rate: An Empirical Investigation

However, the 3.2 results indicate that the negative correlation of money growth and the real rate may only "arise because of the positive correlation of money growth with inflation: [r]

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Research on the key policy rate of China interest rate corridor and the efficiency of the interest rate transmission

Research on the key policy rate of China interest rate corridor and the efficiency of the interest rate transmission

In November 2015, The People's Bank of China lowered the overnight interest rate of Standing Lending Facilities (SLF) to 2.75 percent and the 7-day interest rate of SLF to[r]

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Granger causality of interest rate on REIT’s return

Granger causality of interest rate on REIT’s return

Interest rate proxy is where it gets prolific. Chen (1988) used 20-year US government bonds, three-month, six-month and one-year T-bill. On top of that, the paper also included the expected real interest rate, which is the average of difference between the most recent 12-month collected interest rate and processed CPI. Chan (1994) took the one-month T-bill along with 5 other macroeconomics factors into his model and discovered that a rise in long-term interest rate has negative impact on both common stocks and REITs. McCue (1994) studies on the effects of macro-economy on equity REITs data showed that short-term nominal interest rate explains majority of changes in REIT’s series. T-bill and government bond rate seem to be the most popular indicators. As a long-term investment, real estate seems to have higher correlation with longer-term rates but it does not make a considerable difference in correlation with short or medium interest rates (Muller 1995). In the same paper, Muller claimed that conservatively leveraged REITs with long-term fixed rate loan enjoyed the highest growth while ones with short-term suffered from falling operating profit. Also, because REITs can use long-term loan to hedge against their fixed long-term lease (Chan, 1990), it can be intuitive to take long-term interest rate as the interest rate proxy for the test. However, the result in Chan (1990) study did not suggest the use of long-term debt in balancing out long-term lease. In addition to the risk-free rates, many authors also look at other indicators with higher risk levels like corporate bonds, high-grade bonds, and high-yield bonds. Ling T. He (2003) claimed that high-yield bond is the most effective indicator to explain the changes of return on both equity and mortgage REITs over period of 1972 - 1998.
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Interest Rate Return (MR1) Notes on Compilation

Interest Rate Return (MR1) Notes on Compilation

3. New Business (NIR) New Business on Overnight Deposits, Deposits Redeemable at Notice, Extended Credit Card Debt and Revolving Loans and Overdrafts (See paragraphs 16 to 18 of Annex I to the Regulation) For defining new business on overnight deposits, deposits redeemable at notice, extended credit card debt and revolving loans and overdrafts, a different approach is taken than the one applied to other new business categories. Overnight deposits, deposits redeemable at notice, extended credit card debt and revolving loans and overdrafts experience a large number of in- and out-flows throughout the month. The increases and decreases in the amount on these accounts arise from receipts and payments related to the customer’s economic activity, and are hence related to transactions rather than to the autonomous investment decisions of the customer. Furthermore, it is usual for the greater part of the deposit, overdraft or extended credit card balance to be turned over during the period. For these reasons, the outstanding balance at the reporting date is deemed to be the appropriate indicator for new business 45 .
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What affects the interest rate on deposit from households?

What affects the interest rate on deposit from households?

Beata Gavurova, Kristina Kocisova, Zoltan Rozsa, and Martina Halaskova / Montenegrin Journal of Economics, Vol. 15, No. 2 (2019), 041-057 54 banks more cautious in providing loans that volume has slowed down. Stringent regulations impo- sed pressure on the banks not to create excess reserves in the national central banks and at the same time stimulated the banks to be more cautious receiving deposits. If the bank knew that it was able to provide the given or larger volume of loans from the available deposits, preferred a low deposit rate approach that did not attract new clients or increase the volume of deposits, which would create surplus reserves. In times of interest rate fall and stringent liquidity requirements, there were situations where banks significantly reduced interest rates on deposits rather than cre- dit products. It may have led to a situation that even though the liquidity of the bank declined (LTD grew) with a decline in the interest rate on deposits from households. These findings did not make possible to confirm the validity of the research question RQ3 (Does the growth of liquidity lead to a decrease in deposits interest rates?) which may be affected by the specific characteristics of the analysed period, namely by the ECB's low interest rates policy, strict credit standards, and the regulation of excess liquidity on the market.
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A Rational Savings Bank Deposit Interest Rate in India

A Rational Savings Bank Deposit Interest Rate in India

Biased Interest Trade-off 17. The country’s banking sector have about ` 13 lakh crore parked under SB deposits and about ` 4.5 lakh crore is held under current account deposits (past 12 month average). The 1-year term deposit rates, on an average, hover at the repo rate (the rate at which RBI lends to the banks). Thus considering an average repo rate of 7%, the ` 13 lakh crore parked under SB deposits had a potential to fetch interest to the depositors to the tune of ` 84,000 crore in a year. This is so since as per RBI, on an average, 92% of the total amount of SB deposits held by banks always remains with the bank throughout the year 2 . However, at 3.7% average SB interest rate, what is received by the depositors is only ` 48,000 crore in a year. The prime reason why depositors’ money is not receiving more interest is the RBI’s choice to give the balance ` 36,000 crore to the banking sector to retain their profitability and to cross subsidise their expenditures. Since banking sector has the freedom to pass any excess cost of funds to their base rate (the minimum lending interest rate decided by banks) RBI attempts a balancing act while arriving at the SB deposit rate. RBI’s move on deregulation of SB rates is an attempt to let individual banks decide how best they can let go some component of this ` 36,000 crore to the benefit of the SB depositors (based on their efficient use of cost effective technology to manage such SB deposit accounts).
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Bank deposit rate clustering: theory and empirical evidence

Bank deposit rate clustering: theory and empirical evidence

Not all firms that market retail products or services quote prices, however. For example, financial institutions customarily quote interest rates (yields), rather than prices, for many of their fixed-income investments. An intriguing question is whether the retail customers of these financial firms suffer from a similar downward bias when recalling odd-ending yields and, if so, whether these firms attempt to exploit this behavioral phenomenon. Financial institutions would take advantage of this customer behavior by quoting retail loan rates with odd-ending yields (so that they would be underestimated when recalled), but, in contrast, by quoting retail deposit rates with even-ending yields (so that they would not be underestimated when recalled). There is some anecdotal evidence that banks may in fact engage in this practice. During 1986-87, Davis, Korobow, and Wenninger (1987) conducted a series of interviews with senior commercial and savings bank officers in the New York City area. In their article (page 8), they report:
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An empirical analysis of interest rate spread in Kenya

An empirical analysis of interest rate spread in Kenya

1999) financial reform is mounted and interest rates are liberalized. Table 1 reports on the observed trends and attempts to relate the spread to developments in the financial market and the economy in general. The period before interest rate liberalization is characterized by financial repression with selective credit controls and fixed interest rate spreads. Variations in the interest rate spread were realized when interest rate ceilings were adjusted to protect any loss in real terms following increased inflation rates. The Central Bank of Kenya (CBK) controlled inflation by increasing the liquidity and cash ratios with no interest paid on reserves. Such statutory requirements act as implicit costs to the banks. With a successful financial reform the interest rate spread narrows to reflect gained efficiency in the intermediation process and reduced costs of transactions with improved market competitiveness. The widening spread in the Kenya market in the post- liberalization period indicates a combination of market inefficiency and increased costs of intermediation. The spread represents the failure to meet prerequisites for successful financial liberalization including lack of fiscal discipline, financial instability and macroeconomic instability. It also shows poor sequencing in the shift to monetary policy tools where reserve requirements continued to take priority in curbing inflationary pressure. Furthermore, the financial market remained uncompetitive and the legal framework was still weak.
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Absolute return investments in rising interest rate environments

Absolute return investments in rising interest rate environments

The United States has experienced a roughly 30-year downward trend in interest rates, resulting in a sustained period of positive returns for fi xed-income investments. With interest rates near historically low levels, many investors expect rates will rise. Without attempting to predict the future direction of interest rates, we acknowledge that an increase in interest rates could have signifi cant adverse effects on even the most diversifi ed portfolios. In this environment, investors could benefi t from investment alternatives that have the ability to provide positive returns with little or no correlation to equity and fi xed-income investments. Absolute return strategies are one such alternative asset class.
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Deregulation of Savings Bank Deposit Interest Rate: A Discussion Paper

Deregulation of Savings Bank Deposit Interest Rate: A Discussion Paper

Box 1: Deregulation of Deposit Interest Rates in India – A Historical Account The process of deregulation of deposit interest rates had begun in the 1980s. In April 1985, banks were allowed to set interest rates for maturities between 15 days and up to 1 year, subject to a ceiling of 8 per cent. It was expected that with reasonable rates of interest on maturities, banks would be able to achieve a better distribution of term deposits rather than highly skewed distribution around longer maturities at relatively higher costs. However, when a few banks started offering the ceiling rate of 8 per cent even for maturities of 15 days, other banks followed suit without regard to consideration of profitability and set a single rate of 8 per cent for maturities starting from 15 days and up to one year. The consequence was a shift of deposits from current accounts and, to a lesser extent, from savings accounts to 15-day deposits. As a result of price war among banks, the freedom to set interest rates subject to a ceiling was withdrawn in May 1985. The process of deregulation resumed in April 1992 when the existing maturity-wise prescriptions were replaced by a single ceiling rate of 13 per cent for all deposits above 46 days. The ceiling rate was brought down to 10 per cent in November 1994, but was raised to 12 per cent in April 1995. Banks were allowed to fix the interest rates on deposits with maturity of over 2 years in October 1995, which was further relaxed to maturity of over 1 year in July 1996. The ceiling rate for deposits of ‘30 days up to 1 year’ was linked to the Bank Rate less 200 basis points in April 1997. In October 1997, deposit rates were fully deregulated by removing the linkage to the Bank Rate. Consequently, the Reserve Bank gave the freedom to commercial banks to fix their own interest rates on domestic term deposits of various maturities with the prior approval of their respective Board of Directors/Asset Liability Management Committee (ALCO). Banks were permitted to determine their own penal interest rates for premature withdrawal of domestic term deposits and the restriction on banks that they must offer the same rate on deposits of the same maturity irrespective of the size of deposits was removed in respect of deposits of ` 15 lakh and above in April 1998. Now banks have complete freedom in fixing their domestic deposit rates, except interest rate on savings deposits, which continues to be regulated and is currently stipulated at 3.5 per cent.
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