Abstract:

In this study, the presence and direction of the relationship between average profit share rates of 3 participation banks operating in Turkey, conventional banks' interest rates and inflation are investigated through cointegration and causality analyses. Initially, Johansen cointegration analysis, subsequently, Granger and Toda-Yamamoto (1995) causality analyses are carried out. In the econometric analyses implemented, it has been found that there is a long-run relationship between profit share with maturity of 1, 3, 6, and 12 months(s), interest rates and inflation. The result of both causality analyses points out that there is a one-way causality relationship from interest rates to profit share rates. It is assured that the return rate of participation banks taken part in the study are determined by interest rates of conventional banks.