Investigating the Threshold and Nonlinear Effects of Non-Interest Income Separation on the Financial Performance of US Commercial Banks: A Smooth Transition Regression (STR) Approach

Salim Fadhil Mohammed, Ali Rezazadeh, Samad Hekmati Farid and Ramin Bashir Khodaparasti
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Salim Fadhil Mohammed: PhD Student in Financial Economics, Department of Economics, Urmia University, Urmia, Iran
Ali Rezazadeh: Associate Professor, Department of Economics, Urmia University, Urmia, Iran
Samad Hekmati Farid: Associate Professor, Department of Economics, Urmia University, Urmia, Iran
Ramin Bashir Khodaparasti: Associate Professor of Finance and Insurance, Urmia University, Urmia, Iran

Quarterly Journal of Applied Theories of Economics, 2025, vol. 12, issue 1, 71-96

Abstract: Various instruments have been designed and issued to compensate for the government budget deficit and to finance both public and private sector companies. Addressing the budget deficit issue and adopting appropriate solutions for its financing, along with creating debt based on sound economic principles, is of great importance. Accordingly, this study compares the effects of two financing methods, issuance of general Murabaha bonds and borrowing from the banking system, on economic growth and inflation. The research model for analyzing growth derives from the Solow-Swan growth theory. Given the interrelationships between variables and the limited issuance period of Murabaha bonds, the Bayesian Vector Autoregression (BVAR) method has been employed. The data used are monthly and cover the period from 2019 to 2022. The results show that the issuance of Murabaha bonds initially leads to a decrease in the economic growth rate, but it increases in the subsequent periods. In contrast, increasing government debt to the banking system results in declining economic growth. The effect of Murabaha bonds on the inflation rate is initially positive but decreases after a few periods. However, the inflationary impact of Murabaha bond issuance is greater than that of government debt to the banking system

Keywords: Financial performance; non-interest income from fees and commissions; foreign exchange non-interest income; smooth transition regression (STR) (search for similar items in EconPapers)
Date: 2025
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