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Examining the Effect of Economic Collison: Case On Credit Performance in Islamic Banking

Author

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  • Ardhiani Fadila

    (Department of Management, the Faculty of Economics and Bussines, UPN Veteran Jakarta, Jakarta, Indonesia)

  • Dewi Cahyani Pangestuti

    (Department of Management, the Faculty of Economics and Bussines, UPN Veteran Jakarta, Jakarta)

Abstract

This study will examine the impact of economic collision on the non-performing financing in sharia bank in Indonesia. The current study adopts VAR/VECM method to examine inter variables correlation by testing an economic factors, including 1) Real GDP Growth, 2) Exchange Rate, 3) Inflation, 4) Interest Rate, and 5) IDX Composite. A total NPF of 14 Islamic Banks and 20 Sharia Business Units were selected as data samples from 2006 to 2020. The findings indicate that inflation positively impacts NPF in the short run and delivers the biggest shock to NPF. The result states that Inflation, Exchange rate, and Interest rate are the dominant factors to shock NPF in Islamic Banks. From the analysis results, the economic variables, i.e., GDP, exchange rates, inflation, interest rates, and the IDX Composite, provide a stable long-term relationship and, in the short term, adjust to each other to achieve a new balance in the long term.

Suggested Citation

  • Ardhiani Fadila & Dewi Cahyani Pangestuti, 2022. "Examining the Effect of Economic Collison: Case On Credit Performance in Islamic Banking," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 11(1), pages 132-145, January.
    • Handle: RePEc:rbs:ijfbss:v:11:y:2022:i:1:p:132-145
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    References listed on IDEAS

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