The effect of interbank rates towards conventional and Islamic trade finance instruments / Azmie Joslin Mohd Jackie

This research paper studies on the effect of interbank rate or interest rate towards trade finance instruments. The scope of study focuses on the movement of trade instruments volume in trading businesses, and the objective of this study is to determine what are the possible relationship can interest rate give to these type of instruments. The variables taken for investigation in this study are such as trade bills and trust receipt from both system, Islamic and Conventional Finance. The data used in this study covering from January 2007 until December 2009, which is approximately 3 years period retrieve from Bank Negara Malaysia (BNM) and Datastream. The methodology being used in this study is Autoregressive Model (AR) to determine the relationship between interest rates and trade finance instruments. Results gathered from this study is to indentify whether interest rates have any significance relationship with trade finance instruments or the other way. Since, the result is significant, therefore interest rate is able to affect the trade finance instruments and any other instruments. This due to the fact that interest rate is the trigger of any financial risks gathered from previous research and theory.