ON THE CAUSAL RELATIONSHIP BETWEEN DEPOSIT RATES IN CONVENTIONAL BANKS AND PROFIT-SHARING RATES IN ISLAMIC BANKS IN TURKEY

Öz

This paper empirically investigates whether profit-sharing rates in Islamic banks follow rates of the conventional banks in Turkey over the sample period March 2001 to June 2019 through employing both standard econometric and wavelet approaches. We identify both unidirectional and bidirectional causality between the monthly observations at different time scales. Moreover, the direction of the relationship considerably varies and displays coefficient sign reversal over wavelet scales. Overall, our findings suggest that the rates of return in both banking sectors are not independent of each other and, therefore, have important implications regarding financial stability and risk management.