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Chapter 4: Discussion
Our facts and numbers on the monthly sequence of Islamic investment rates and accepted deposit rates were assembled from the Monthly Statistical Bulletin, which is released by the Bank Negara Malaysia. The sequence of monthly facts and numbers are aggregated and described founded on the mean rates over all economic institutions. The trying time span was from April 1995 to April 2004. The experiment dimensions was 109 for each time series. For robustness, we analyzed the rates supplied by two kinds of economic institutions: banks and finance companies. For each kind of organizations, we compared Islamic investment rates and accepted deposit rates on savings down payments as well as time down payments of diverse maturities, extending from one month to 12 months.
Table 3 presents the descriptive statistics for the experiment data. The abstract statistics, in specific, display that the Islamic investment rates are, on mean, considerably smaller than the accepted deposit rates. This finding is factual for both the banks and the finance companies. Furthermore, the instability and the minimum-maximum variety of Islamic investment rates are considerably smaller than those of accepted deposit rates, except for the buying into rates on Islamic banks' savings deposits. These outcomes are counterintuitive because the Islamic deposits, founded on the PLS idea, should have higher risks than accepted deposits.
A likely cause for the overhead outcomes is that, in perform, the comes back on Islamic deposits are administratively connected to the deposit rates suggested by conventional banking. The last pillar of Table 3, in specific, displays that the Islamic investment rates are highly correlated with the accepted deposit rates on a maturity-matched basis. The association coefficients, for demonstration, variety from 0.89 to 0.97 for the banks and from 0.88 to 0.94 for the finance companies. However, to direct out the likelihood of spurious associations, we next undertook some benchmark econometric checks to work out Granger causality, unit origin, and co integration.
The Granger causality check was conveyed out to work out if alterations in Islamic investment rates origin changes in the accepted deposit rates and if alterations in the accepted deposit rates origin changes in the Islamic investment rates. Table 4 accounts the outcomes of the pair-wise Granger causality test. The outcomes display that for each of the six maturity-matched situations, we will not decline the null hypothesis that alterations in Islamic investment rates manage not origin changes in the accepted deposit rates. On the other hand, we can decline the null hypothesis that alterations in the accepted deposit rates manage not ...