The Mechanism of Effect of Economic Factors on the Volume of Bank Deposits in Islamic Banking Systems

In economic literature, one of the important roles of deposits is that it provides a suitable basis for investment. The aim of the present study is to investigate the mechanism of economic factors effect on the volume of bank deposits in the banking system of Iran and Malaysia with the threshold approach (STAR) during the years 1397-1379 for the Iranian economy and 1984-2017 for the Malaysian economy. In this regard, the application of soft transfer regression model was used to estimate the mechanism of the effect of economic and business factors on the volume of bank deposits in Islamic banking. The results of the model for Iran show the negative effect of the variables of exchange rate fluctuations, inflation rate, financial crises and the positive effect of the variables of oil price, liquidity, deposit interest rate and bank facilities on the total volume of bank deposits in Iran. For Malaysia, the variables of gross domestic product, liquidity and bank facilities have a positive effect, and the variables of exchange rate fluctuations, oil price and inflation rate have a negative effect on the total volume of bank deposits. According to the results for Iran's economy; the increase in oil revenues and the increase in the foreign assets of the central bank has caused an increase in the volume of liquidity, and as a result, inflation has also increased. The expectation of inflation in the future period and the uncertainty of the inflation rate have reduced the volume of bank facilities and led to the withdrawal of money from the banking system and entering the speculative and black markets and worsened the country's production situation. While for the Malaysian economy according to the money endogeneity test, liquidity has been directed towards production and has led to an increase in production and sustainable economic growth. Therefore, it is necessary for the central bank to pay attention to the policies of organizing assets and liabilities and saving on imaginary assets in order to gradually adjust the balance sheet of the banking system.