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The effect of macroeconomic variables on non performance financing of Islamic Banks in Indonesia

Author

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  • Latifah Dian Iriani
  • Imamudin Yuliadi

Abstract

This research is going to discuss about the determinant macro variables and bank’s behavior determinant credit risk on Islamic rural bank in Indonesia. It could be seen on macro variables such as inflation, exchange rate, Jakarta I slamic index (JII) and money supply (M2), and bank’s behavior such as financing. Research methodology used at this study is Vector Error Correction Model (VECM). Following these procedures, it applies Unit Roots Test, Augmented Dickey Fuller Test, Lag Length Criteria Test, Correlation Matrix – Johansen Julius Co-integration Test, VECM Estimation, Impulse Response and Variance Decomposition Test. The result show that both bank behaviors and macroeconomic variables are significant affecting non-performing financing (NPF). The banking need more careful to manage internal and external factors that influence non-performing financing (NPF).

Suggested Citation

  • Latifah Dian Iriani & Imamudin Yuliadi, 2015. "The effect of macroeconomic variables on non performance financing of Islamic Banks in Indonesia," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 7(2), pages 120-134.
    • Handle: RePEc:uii:journl:v:7:y:2015:i:2:p:120-134:id:4283
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    Cited by:

    1. MB Hendrie Anto & Faaza Fakhrunnas & Yunice Karina Tumewang, 2022. "Islamic banks credit risk performance for home financing: Before and during Covid-19 pandemic," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 14(1), pages 113-125.

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