What drives Islamic banks’ credit risk in the long run? a macroeconomic approach

Credit risk is the most anticipated risk in the banking system. It is one of the key elements to measure systemic risk and stress testing financial fragility which is very helpful to formulate macro-prudential surveillance in financial systems. Unlike the conventional banking, the empirical evidence...

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Main Authors:	Abduh, Muhamad, Nursechafia, Nursechafia
Format:	Conference or Workshop Item
Language:	English
Published:	2013
Subjects:	BP173.75 Islam and economics HG3691 Credit
Online Access:	http://irep.iium.edu.my/30388/ http://irep.iium.edu.my/30388/1/MFA_1_merged.pdf

id	iium-30388
recordtype	eprints
spelling	iium-303882013-07-24T07:05:36Z http://irep.iium.edu.my/30388/ What drives Islamic banks’ credit risk in the long run? a macroeconomic approach Abduh, Muhamad Nursechafia, Nursechafia BP173.75 Islam and economics HG3691 Credit Credit risk is the most anticipated risk in the banking system. It is one of the key elements to measure systemic risk and stress testing financial fragility which is very helpful to formulate macro-prudential surveillance in financial systems. Unlike the conventional banking, the empirical evidence of macro-credit risk link in Islamic banking is still considered as an underdeveloped area. Consequently, a further research regarding the stability of the Islamic banking industry has risen to the substantial agenda. Hence, this paper is aimed at determining and assessing the long run vulnerabilities of Islamic financing quality as a response to changes in key macroeconomic variables by using time series econometric approaches of cointegration and vector autoregression (VAR). By simulating variance decomposition (VD) and impulse response function (IRF), it is found that there is evidence of long-run relationship between credit risk ratio in Islamic bank and the selected macroeconomic variables. The exchange rate, supply side-inflation, and growth have negatively driven credit risk rate in Islamic banking, while money supply and Islamic interbank money market rate have positively driven the risk rate. 2013-06-02 Conference or Workshop Item PeerReviewed application/pdf en http://irep.iium.edu.my/30388/1/MFA_1_merged.pdf Abduh, Muhamad and Nursechafia, Nursechafia (2013) What drives Islamic banks’ credit risk in the long run? a macroeconomic approach. In: 15th Malaysian Finance Association (MFA) Conference 2013, 2-4 June 2013, Sime Darby Convention Centre, Kuala Lumpur, Malaysia.
repository_type	Digital Repository
institution_category	Local University
institution	International Islamic University Malaysia
building	IIUM Repository
collection	Online Access
language	English
topic	BP173.75 Islam and economics HG3691 Credit
spellingShingle	BP173.75 Islam and economics HG3691 Credit Abduh, Muhamad Nursechafia, Nursechafia What drives Islamic banks’ credit risk in the long run? a macroeconomic approach
description	Credit risk is the most anticipated risk in the banking system. It is one of the key elements to measure systemic risk and stress testing financial fragility which is very helpful to formulate macro-prudential surveillance in financial systems. Unlike the conventional banking, the empirical evidence of macro-credit risk link in Islamic banking is still considered as an underdeveloped area. Consequently, a further research regarding the stability of the Islamic banking industry has risen to the substantial agenda. Hence, this paper is aimed at determining and assessing the long run vulnerabilities of Islamic financing quality as a response to changes in key macroeconomic variables by using time series econometric approaches of cointegration and vector autoregression (VAR). By simulating variance decomposition (VD) and impulse response function (IRF), it is found that there is evidence of long-run relationship between credit risk ratio in Islamic bank and the selected macroeconomic variables. The exchange rate, supply side-inflation, and growth have negatively driven credit risk rate in Islamic banking, while money supply and Islamic interbank money market rate have positively driven the risk rate.
format	Conference or Workshop Item
author	Abduh, Muhamad Nursechafia, Nursechafia
author_facet	Abduh, Muhamad Nursechafia, Nursechafia
author_sort	Abduh, Muhamad
title	What drives Islamic banks’ credit risk in the long run? a macroeconomic approach
title_short	What drives Islamic banks’ credit risk in the long run? a macroeconomic approach
title_full	What drives Islamic banks’ credit risk in the long run? a macroeconomic approach
title_fullStr	What drives Islamic banks’ credit risk in the long run? a macroeconomic approach
title_full_unstemmed	What drives Islamic banks’ credit risk in the long run? a macroeconomic approach
title_sort	what drives islamic banks’ credit risk in the long run? a macroeconomic approach
publishDate	2013
url	http://irep.iium.edu.my/30388/ http://irep.iium.edu.my/30388/1/MFA_1_merged.pdf
first_indexed	2023-09-18T20:44:32Z
last_indexed	2023-09-18T20:44:32Z
_version_	1777409586582519808

What drives Islamic banks’ credit risk in the long run? a macroeconomic approach

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