The Analysis of Relationship Between Return Rate on Deposit of Islamic Bank and Conventional Bank in Indonesia

Abstract

This research analyzes the correlation of conventional and Islamic bank deposit return in Indonesia, using monthly data from February 2009 to February 2014. The method analysis shows that there is long-run relationship between conventional and Islamic bank deposit return. Shock of conventional deposit rate influence the fluctuation of Islamic deposit return and vice versa. Shock of Islamic deposit return has less contribution to explain the fluctuation of conventional deposit rate in all deposit model (1-month deposit, 3-month deposit, 6-month deposit, and 12-month deposit) than shock of conventional deposit rate explain the fluctuation of Islamic deposit return. It happens because market share of conventional banking is larger than Islamic banking. Therefore, if there is shock in Islamic deposit return, it does not influence much to explain the fluctuation of conventional deposit rate.

Keywords: PLS Rate, Interest Rate, Deposit, Conventional Bank, Islamic bank