Macroeconomic determinants of home financing in Malaysia : A comparative analysis of conventional and Islamic banks

The purpose of this study is to analyze and compare the dynamic relationship between macroeconomic variables (i.e. gross domestic product, house prices, stock prices, and interest rate) and home financing provided by conventional and Islamic banks in Malaysia. The recent financial crisis has high...

Full description

Saved in:

Bibliographic Details
Main Author:	Usman, Farrell Hazsan Emban
Format:	Thesis
Language:	eng eng
Published:	2014
Subjects:	HG Finance
Online Access:	https://etd.uum.edu.my/4644/1/s814580.pdf https://etd.uum.edu.my/4644/2/s814580_abstract.pdf
Tags:	Add Tag No Tags, Be the first to tag this record!

id	my-uum-etd.4644
record_format	uketd_dc
institution	Universiti Utara Malaysia
collection	UUM ETD
language	eng eng
advisor	Mohd Yusof, Rosylin
topic	HG Finance
spellingShingle	HG Finance Usman, Farrell Hazsan Emban Macroeconomic determinants of home financing in Malaysia : A comparative analysis of conventional and Islamic banks
description	The purpose of this study is to analyze and compare the dynamic relationship between macroeconomic variables (i.e. gross domestic product, house prices, stock prices, and interest rate) and home financing provided by conventional and Islamic banks in Malaysia. The recent financial crisis has highlighted the importance of the interactions of macroeconomic factors and home financing. The dual banking system in Malaysia provides an important and distinct case study of the interplay of macroeconomic variables and home financing. The period covered for this study is from first quarter of 2007 to second quarter of 2014. This study employs time series analysis techniques such as autoregressive distributed lag (ARDL) bound-testing cointegration approach, impulse response function (IRF), and forecast error variance decomposition (FEVD) to analyze the long-run and short-run relationships among the variables. This study finds that macroeconomic variables have different long-run and short-run influence on home financing provided by conventional and Islamic banks. Both in the long-run and short-run, home financing provided by Islamic banks are more linked to real sector economy as compared to home financing provided by conventional banks. However, interest rate is found to have significant influence on both conventional and Islamic banks in the longrun. Based on the findings of this study, policy intervention to stimulate or dampen home financing provided by conventional banks must focus on influencing stock prices and monetary policy. On the other hand, policy intervention to stimulate or dampen home financing provided by Islamic banks must focus on GDP, house prices, and monetary policy
format	Thesis
qualification_name	masters
qualification_level	Master's degree
author	Usman, Farrell Hazsan Emban
author_facet	Usman, Farrell Hazsan Emban
author_sort	Usman, Farrell Hazsan Emban
title	Macroeconomic determinants of home financing in Malaysia : A comparative analysis of conventional and Islamic banks
title_short	Macroeconomic determinants of home financing in Malaysia : A comparative analysis of conventional and Islamic banks
title_full	Macroeconomic determinants of home financing in Malaysia : A comparative analysis of conventional and Islamic banks
title_fullStr	Macroeconomic determinants of home financing in Malaysia : A comparative analysis of conventional and Islamic banks
title_full_unstemmed	Macroeconomic determinants of home financing in Malaysia : A comparative analysis of conventional and Islamic banks
title_sort	macroeconomic determinants of home financing in malaysia : a comparative analysis of conventional and islamic banks
granting_institution	Universiti Utara Malaysia
granting_department	Othman Yeop Abdullah Graduate School of Business
publishDate	2014
url	https://etd.uum.edu.my/4644/1/s814580.pdf https://etd.uum.edu.my/4644/2/s814580_abstract.pdf
_version_	1776103652997464064
spelling	my-uum-etd.46442023-01-17T07:29:40Z Macroeconomic determinants of home financing in Malaysia : A comparative analysis of conventional and Islamic banks 2014 Usman, Farrell Hazsan Emban Mohd Yusof, Rosylin Othman Yeop Abdullah Graduate School of Business Othman Yeop Abdullah Graduate School of Business HG Finance The purpose of this study is to analyze and compare the dynamic relationship between macroeconomic variables (i.e. gross domestic product, house prices, stock prices, and interest rate) and home financing provided by conventional and Islamic banks in Malaysia. The recent financial crisis has highlighted the importance of the interactions of macroeconomic factors and home financing. The dual banking system in Malaysia provides an important and distinct case study of the interplay of macroeconomic variables and home financing. The period covered for this study is from first quarter of 2007 to second quarter of 2014. This study employs time series analysis techniques such as autoregressive distributed lag (ARDL) bound-testing cointegration approach, impulse response function (IRF), and forecast error variance decomposition (FEVD) to analyze the long-run and short-run relationships among the variables. This study finds that macroeconomic variables have different long-run and short-run influence on home financing provided by conventional and Islamic banks. Both in the long-run and short-run, home financing provided by Islamic banks are more linked to real sector economy as compared to home financing provided by conventional banks. However, interest rate is found to have significant influence on both conventional and Islamic banks in the longrun. Based on the findings of this study, policy intervention to stimulate or dampen home financing provided by conventional banks must focus on influencing stock prices and monetary policy. On the other hand, policy intervention to stimulate or dampen home financing provided by Islamic banks must focus on GDP, house prices, and monetary policy 2014 Thesis https://etd.uum.edu.my/4644/ https://etd.uum.edu.my/4644/1/s814580.pdf text eng public https://etd.uum.edu.my/4644/2/s814580_abstract.pdf text eng public masters masters Universiti Utara Malaysia Abidin, M. Z., & Rasiah, R. (2009). The global financial crisis and the Malaysian economy: Impact and responses. Kuala Lumpur: United Nations Development Programme, Malaysia. Ahmad, A. R. Y. (2009). Role of finance in achieving maqasid al-Shariah. Islamic Economic Studies, 19(2), 1-18. Ahmed, H. (2011). Maqasid al-Shariah and Islamic financial products: a framework for assessment. ISRA International Journal of Islamic finance, 3(1), 149-160. Alias, N. Z., Huat, Q. B., & Mohamad, A. A. (2014). Malaysia: Loans and Household Debt- An Assessment. Economic Research, 3(1), Malaysian Rating Corporation Berhad. Retrieved from http://www.marc.com.my/home/userfiles/file/sia% 20Loans%20and%20HHdebt.pdf. Ayub, M. (2007). Understanding Islamic Finance (Vol. 462): John Wiley & Sons. Beck, T., Büyükkarabacak, B., Rioja, F., & Valev, N. (2012). Who gets the credit? And does it matter? Household vs. firm lending across countries. The B.E. Journal of Macroeconomics: 12(1), (Contributions), Article 2. Bernanke, B., Gertler, M., & Gilchrist, S. (1994). The financial accelerator and the flight to quality (Working Paper No. 4789). National Bureau of Economic Research. Retrieved from http://www.nber.org/papers/w4789. Bernanke, B. S., & Blinder, A. S. (1988). Credit, money, and aggregate demand (Working Paper No. 2534). National Bureau of Economic Research Cambridge, Mass., USA. Retrieved from http://www.nber.org/papers/w2534. Bernanke, B. S., & Gertler, M. (1995). Inside the black box: the credit channel of monetary policy transmission (Working Paper No. 5146). National Bureau of Economic Research. Retrieved from http://www.nber.org/papers/w5146. Bernanke, B. S., Gertler, M., & Gilchrist, S. (1999). The financial accelerator in a quantitative business cycle framework. Handbook of Macroeconomics, 1, 1341-1393. Bianco, K. M. (2008). The subprime lending crisis: Causes and effects of the mortgage meltdown: CCH, Wolters Kluwer Law & Business. Borio, C. E., & Lowe, P. W. (2002). Asset prices, financial and monetary stability: exploring the nexus. Bank for International Settlements Press & Communications CH-4002 Basel, Switzerland. BNM (2003a). Housing Loans. Banking Info. Bank Negara Malaysia. Retrieved from http://www.bankinginfo.com.my/_system/media/down loadables/housing_loans.pdf. BNM (2003b). House Financing-i. Banking Info. Bank Negara Malaysia. Retrieved from http://www.bankinginfo. com.my/_system/media/downloadables/house_financ ing.pdf. BNM Monthly Statistical Bulletin. Retrieved from http://www.bnm.gov.my/index.php? ch=en_publication_synopsis&pg=en_publication_ statistical_rpt&ac=4&lang=en&eId=box1. BNM (2014). Financial Stability and Payment Systems Report 2013: Bank Negara Malaysia. BNM Guidelines on Musharakah and Mudharabah Contracts for Islamic Banking Institutions. Retrieved from http://www.bnm.gov.my/guidelines/ 01_banking/04_prudential_stds/15_mnm.pdf. Brissimis, S. N., & Vlassopoulos, T. (2009). The interaction between mortgage financing and housing prices in Greece. The Journal of Real Estate Finance and Economics, 39(2), 146-164. Calza, A., Gartner, C., & Sousa, J. (2001). Modeling the demand for loans to the private sector in the euro area. Applied Economics, 35(1), 107-117. Case, B., Pollakowski, H. O., & Wachter, S. M. (1991). On choosing among house price index methodologies. Real Estate Economics, 19(3), 286-307. Case, K. E., Quigley, J. M., & Shiller, R. J. (2005). Comparing wealth effects: the stock market versus the housing market. Advances in Macroeconomics, 5(1). Chong, B. S., & Liu, M.-H. (2009). Islamic banking: interest-free or interest-based? Pacific-Basin Finance Journal, 17(1), 125-144. Crotty, J. (2009). Structural causes of the global financial crisis: A critical assessment of the ‘new financial architecture’. Cambridge Journal of Economics, 33(4), 563-580. DOSM (2014). Gross Domestic Product Second Quarter 2014: Department of Statistics, Malaysia. El-Gamal, M. A. (2006). Islamic finance: Law, economics, and practice. New York, NY: Cambridge University Press. Engle, R. F., & Granger, C. W. J. (1987). Cointegration and error correction: representation, estimation and testing. Econometrica, Vol 55 No. 2, pp. 251-276. Enrst & Young (2013). World Islamic Banking Competitiveness Report 2013-14. Ernst & Young. Fase, M. M. (1995). The demand for commercial bank loans and the lending rate. European Economic Review, 39(1), 99-115. Fitzpatrick, T., & McQuinn, K. (2007). House prices and mortgage credit: Empirical evidence for Ireland. The Manchester School, 75(1), 82-103. Gerlach, S., & Peng, W. (2005). Bank lending and property prices in Hong Kong. Journal of Banking & Finance, 29(2), 461-481. Hasan, M., & Dridi, J. (2010). The effects of the global crisis on Islamic and conventional banks: A comparative study: International Monetary Fund. Hofmann, B. (2004). The determinants of bank credit in industrialized countries: Do property prices matter? International Finance, 7(2), 203-234. Holy Quran. Retrieved from http://quran.com/2/275. Ibrahim, M. H. (2006). Stock prices and bank loan dynamics in a developing country: The case of Malaysia. Journal of Applied Economics, 9(1), 71-89. Jickling, M. (2009). Causes of the financial crisis. CRS Report for Congress. Congressional Research Service. Johansen, S. (1991). Estimation and hypothesis testing of cointegrating vectors in Gaussian vector autoregressive models. Econometrica, Vol. 55, pp. 251-76. Kassim, S. H., Majid, M. S. A., & Yusof, R. M. (2009). Impact of monetary policy shocks on the conventional and Islamic banks in a dual banking system: evidence from Malaysia. Journal of Economic Cooperation and Development, 30(1), 41-58. Khan, I. (2012, October 1). Critical issues with Shariah screening criteria. Islamic Finance News. Retrieved from http://islamicfinancenews.com.eserv.uum.edu.my/ listing_article_ID1.asp?nm_id=28813&searchid=155 89. Khoon, G. S., & Lim. (2010). The impact of the global financial crisis: The case of Malaysia: Third World network (TWN). Kim, S. B., & Moreno, R. (1994). Stock prices and bank lending behavior in Japan. Economic Review, 31-42. Koop, G., Pesaran, M. H., & Potter, S. M. (1996). Impulse response analysis in nonlinear multivariate models. Journal of Econometrics, 74(1), 119-147. Lim, M.-H., & Goh, S.-K. (2012). How Malaysia weathered the financial crisis: policies and possible lessons. How to prevent the next crisis: Lessons from Country Experiences of the Global Financial Crisis: The North-South Institute. Maslow, Abraham H. (1954). Motivation and Personality. New York, NY: Harper and Row Publishers Inc. McKibbin, W. J., & Stoeckel, A. (2010). The Global Financial Crisis: Causes and Consequences. Asian Economic Papers, 9(1),54-86. Meera, A. K. M., & Abdul Razak, D. (2005). Islamic Home Financing through Musharakah Mutanaqisah and al-Bay’Bithaman Ajil Contracts: A Comparative Analysis. Review of Islamic Economics, 9(2), 5-30. Mendoza, E. G., & Terrones, M. E. (2008). An anatomy of credit booms: evidence from macro aggregates and micro data: National Bureau of Economic Research. Narayan, P. K. (2005). The saving and investment nexus for China: evidence from cointegration tests. Applied Economics, 37(17), 1979-1990. Nurhanani, R., Ahmad, A. S. M., & Mohd, F. M. Y. (2012). Volatility analysis of FTSE Bursa Malaysia: Study of the problems of Islamic stock market speculation in the period 2007 to 2010. African Journal of Business Management, 6(29), 8490-8495. Pesaran, M. H., & Shin, Y. (1998). Generalized impulse response analysis in linear multivariate models. Economics Letters, 58(1), 17-29. Pesaran, M. H., & Shin, Y. (1999). An Autogressive Distributed Lag Modeling Approach to Cointegration Analysis. S. Strom, A. Holly and P. Diamond (eds). Centennial Volume of Ragnar Frisch, Cambridge: Cambridge University Press. Pesaran, M. H., Shin, Y., & Smith, R. J. (1996). Testing for the existence of a longrun relationship. DAE Working Paper, No. 9622. Department of Applied Economics. University of Cambridge, Cambridge. Poterba, J. M. (2000). Stock market wealth and consumption. The Journal of Economic Perspectives, 99-118. Schularick, M., & Taylor, A. M. (2009). Credit booms gone bust: monetary policy, leverage cycles and financial crises, 1870–2008: National Bureau of Economic Research. Shanmugam, B., & Zahari, Z. R. (2009). A primer on Islamic finance: The Research Foundation of CFA Institute. Starr-McCluer, M. (1998). Stock market wealth and consumer spending: Division of Research and Statistics, Division of Monetary Affairs, Federal Reserve Board. Tse, R.Y.C. (1997). Optimal loan size and mortgage rationing. Journal of Property Finance, Vol. 8 No. 3, pp. 195-206.

Macroeconomic determinants of home financing in Malaysia : A comparative analysis of conventional and Islamic banks

Similar Items