Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/129748
Authors: 
Caporale, Guglielmo Maria
Çatık, Abdurrahman Nazif
Helmi, Mohamad Husam
Ali, Faek Menla
Tajik, Mohammad
Year of Publication: 
2016
Series/Report no.: 
DIW Discussion Papers 1557
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. By contrast, the relative importance of Islamic credit shocks in driving output growth is much greater in the low growth regime, their effects being positive. These findings can be interpreted in terms of the distinctive features of Islamic banks.
Subjects: 
Bank lending channel
Malaysia
Monetary transmission
Threshold VAR
JEL: 
C32
E31
E42
E58
Document Type: 
Working Paper

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