Islamic Banking Existence and Domestic Credit: Study at Seven Countries
This paper empirically investigates the determinants of domestic credit across a wide range of 7 countries; these are United Kingdom, Malaysia, Egypt, Kuwait, Qatar, Bahrain and Indonesia. We use dynamic panel estimation to examine effects of exchange rate, inflation, lending interest rate, banking crisis and existence of wholesale Islamic banking on domestic credit. We obtain several notable empirical results. First, the lending interest rate, banking crisis negatively and insignificantly contribute to domestic credit. The existence of Islamic bank has positive and insignificant contribution to domestic credit, while exchange rate positively and significantly contributes to domestic credit. Inflation negatively and significantly contributes to domestic credit. Second, banking crisis and existence of wholesale Islamic banking show insignificant effect on domestic credit. Third, we find that today’s domestic credit is depended on domestic credit in the previous year.
Abduh, M. et.al. (2011). Factor Influence Depositor's Withdrawal Behavior in Islamic Banking: A Theory of Reasoned Action. World Academy of Science, Engineering and Technology, 60: 2074-2079.
Aghion, P. et.al. (2009). Exchange rate volatility and productivity growth:The role of financial development. Journal of Monetary Economics, 56 (4): 494-513.
Arteta, C. & G. Hale. (2008). Sovereign Debt Crises and Credit to the Private Sector. Journal of International Economics, 74 (1): 53-69.
Askari , H. et.al. (2015). Introduction to Islamic Economics: Theory and Application. Solaris South Tower: Jhon Wiley & Sons.
Boyd, J. H. et.al. (2001). The Impact of Inflation on Financial Sector Performance. Journal of Monetary Economics, 47: 221-248.
Brown, K. (2003). Islamic Banking Comparative Analysis. The Arab Bank Review, 5(2): 43-50.
Büyükkarabacak, B. & N.T. Valev. (2010). The role of household and business credit in banking crises. Journal of Banking & Finance, 34: 1247–1256.
Caballero, R. & A. Krishnamurthy. (2005). Exchange Rate Volatility and the Credit Channel in Emerging Markets: A Vertical Perspective. International Journal of Central Banking, 1 (1): 207-245.
Ekinci, A. (2016). The Impact of Market Risk on Bank Performance: Evidence from Turkey. International Journal of Economics and Financial Issues, 6(2): 427-434.
Ezeji, C. E. (2014). The Impact of Macro-Economic Indicators on Domestic Credit in Commercial Banks in Nigeria. International Journal of Empirical Finance, 2(1): 34-44.
Gozgor, G. (2014). Determinants of domestic credit levels in emerging markets: The role of external factors. Emerging Markets Review, 18: 1-18.
IMF. (2016). World Economic Outlook. New York: International Monetary Fund.
Jones, G. (2016). Banking Crisis: Perspectives from The New Palgrave Dictionary. Hampshire: Palgrave Macmillan.
Magud, N. E. et.al. (2011) Capital Inflows, Exchange Rate Flexibility, and Credit Booms. NBER Working Paper, 17670: 1-33.
Obstfeld, M. (2012). Does The Current Account Still Matter? NBER Working Paper Series (17877): 1-65.
Pandit, B. (2016). Domestic Credit. Retrieved July 3, 2016, from Busines Pandit: http://www.businesspundit.com/encyclopedia/economics/domestic-credit/
Rashid, H. (2011). Credit to Private Sector, Interest Spread and Volatility in Credit Flows: Do Bank Ownership and Deposits Matter? DESA Working Paper. 105: 1-22.
Rose, A. K. & M.M. Spiegel. (2009) Cross-Country Causes and Consequences of the 2008 Crisis: Early Warning. Federal Reserve Bank of San Fransisco, 17: 1-55.
Söğüt, E. (2008) The Determinants Of Financial Development And Private Sector Credits: Evidence From Panel Data. (Unpublished Thesis). Turkey: The Graduate School of Social Sciences of Middle East Technical University.
Suh, H. (2012) Dichotomy Between Macroprudential Policy and Monetary Policy on Credit And Inflation. Federal Reserve Bank of Philadelphia Working Paper, 13(6): 1-23.
WEF. (2016). The Global Competitiveness Report 2015–2016. Cologny: World Economic Forum.
World Bank. (2016). World Development Indicator. New york: International Bank for Reconstruction and Development/The World Bank.
- There are currently no refbacks.