Analyzes The Journal

Income Elasticity of Time Deposit in the Context of Bangladesh

· Theme : Time Deposit

· Title : Income Elasticity of Time Deposit in the Context of Bangladesh

· Author :

1. Arup Kumar Sinha (Corresponding author)

Department of Economics, East West University

43 Mohakhali, Dhaka 1212, Bangladesh

Tel: 88-15-5630-2377

E-mail: aksinha@ewubd.edu, aks.ewu@gmail.com

2. Muntasir Chaudhury

Department of Economics, East West University

43 Mohakhali, Dhaka 1212, Bangladesh

E-mail: muntasir_chaudhury@yahoo.com

3. A. H. M. R. Imon

Institute of Mathematical Research, University Putra Malaysia

Malaysia

E-mail: imon_ru@yahoo.com

· Year Published: December 2008

INTRODUCTION

Banks and financial institutes are always making efforts to increase their money deposits. They are making different policies time to time to do it. Because the more the deposits they have the more the investment they can make in different sectors and possibly earn more profit leading to contribution in economy. That is why we were interested to determine the factors on which the deposit depends and finally measures the elasticity.

PROBLEM

In the start of this paper we investigated the roles played by components real per capita income and deposit rate in the determination of time deposit and subsequently we tried to show that time deposit is income elastic.

PURPOSE

In our study we have shown the effect to theses two variables in the determination of time deposit and subsequently the income elasticity of time deposit in the context of Bangladesh.

METHODOLOGY

Hausman Specification Test is used to check for simultaneity in the endogenous variables. VIF is used to see the presence of multicollinearity and stepwise regression is used to determine the model to estimate the time deposit efficiently.

· Dependent Variable : Time Deposit

· Independent Variable : Deposite rate and real income.

· Population in this study: Time Deposit in Bangladesh

RESULT AND ANALYSIS

The approximation of the coefficient of independent variable income is greater than one reflects the fact that, time deposit is a luxury good. That means after a certain level of real income the percentage increase in long-term savings is greater then the percentage change in income.

CONCLUSION

So the demand for deposit is going up with increase in income but the deposit rate changes little and the increase in time deposit is mainly due to increase in income.

Analyzer : Samuel David Lee