The dependence of Islamic bank rates on the conventional bank rate violates the religiosity principle and the fundamentals of an efficient market due to the possibility of arbitrage profit from the rate differences. This study tests such dependency in a dual banking system by considering monthly data from January 2009 to April 2018 on Malaysian banks using several ARDL tests, supplemented by robustness tests using a 12-month correlation of the rolling standard deviation and causality models based on the Toda-Yamamoto approach to investigate the short- and long-run dependency of rates. The study finds that Malaysia's Islamic bank deposit and financing rates are influenced by both the conventional and Bank Negara Malaysia's policy rates. Results imply that Islamic banks do serve profit-driven customers. We suggest that Islamic banks are forced to benchmark their rates to conventional rates because of the 

العنوان

International Review of Economics & Finance (IREF)

الناشر

Sciencedirect

بلد الناشر

الولايات المتحدة الأمريكية

Indexing

Thomson Reuters

معامل التأثير

4,8

نوع المنشور

Both (Printed and Online)

المجلد

86

السنة

2023

الصفحات

1003-1021