The susceptibility of Islamic banks’ credit risk towards macroeconomic variables

Credit risk is the most anticipated risk in the banking system. It is one of the key elements to assess systemic risk and stress testing financial fragility which is very helpful to come up with macro-prudential surveillance in financial systems. Unlike the conventional banking system, there is dear...

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Main Authors:	Nursechafia, Nursechafia, Abduh, Muhamad
Format:	Article
Language:	English
Published:	IIUM Institute of Islamic Banking and Finance 2014
Subjects:	BP173.75 Islam and economics HG1501 Banking
Online Access:	http://irep.iium.edu.my/36510/ http://irep.iium.edu.my/36510/ http://irep.iium.edu.my/36510/1/JIF_3%2C1%2C_p_23-37.pdf

id	iium-36510
recordtype	eprints
spelling	iium-365102018-06-20T07:14:44Z http://irep.iium.edu.my/36510/ The susceptibility of Islamic banks’ credit risk towards macroeconomic variables Nursechafia, Nursechafia Abduh, Muhamad BP173.75 Islam and economics HG1501 Banking Credit risk is the most anticipated risk in the banking system. It is one of the key elements to assess systemic risk and stress testing financial fragility which is very helpful to come up with macro-prudential surveillance in financial systems. Unlike the conventional banking system, there is dearth of empirical study on macro-credit risk in relation with Islamic banking. As such, further research regarding the stability of the Islamic banking industry has become imperative. Accordingly, this paper is aimed at determining and assessing the long run vulnerabilities of Islamic financing sustainability in term of its response to changes in key macroeconomic variables by using time series econometric approaches of cointegration and vector autoregression (VAR). Based on the result of simulating variance decomposition (VD) and impulse response function (IRF), it is found that, sufficient evidence of long-run relationship between credit risk ratio in Islamic banking industry and the selected macroeconomic variables exist. The exchange rate, supply side-inflation, and growth have been indicated to negatively influence credit risk rate in Islamic banking, while money supply and Islamic interbank money market rate positively affect the risk rate. IIUM Institute of Islamic Banking and Finance 2014-03-01 Article PeerReviewed application/pdf en http://irep.iium.edu.my/36510/1/JIF_3%2C1%2C_p_23-37.pdf Nursechafia, Nursechafia and Abduh, Muhamad (2014) The susceptibility of Islamic banks’ credit risk towards macroeconomic variables. Journal of Islamic Finance, 3 (1). pp. 23-37. ISSN 2289-2117 (O), 2289-2109 (P) http://journals.iium.edu.my/iiibf-journal/index.php/jif/issue/archive
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 HG1501 Banking
spellingShingle	BP173.75 Islam and economics HG1501 Banking Nursechafia, Nursechafia Abduh, Muhamad The susceptibility of Islamic banks’ credit risk towards macroeconomic variables
description	Credit risk is the most anticipated risk in the banking system. It is one of the key elements to assess systemic risk and stress testing financial fragility which is very helpful to come up with macro-prudential surveillance in financial systems. Unlike the conventional banking system, there is dearth of empirical study on macro-credit risk in relation with Islamic banking. As such, further research regarding the stability of the Islamic banking industry has become imperative. Accordingly, this paper is aimed at determining and assessing the long run vulnerabilities of Islamic financing sustainability in term of its response to changes in key macroeconomic variables by using time series econometric approaches of cointegration and vector autoregression (VAR). Based on the result of simulating variance decomposition (VD) and impulse response function (IRF), it is found that, sufficient evidence of long-run relationship between credit risk ratio in Islamic banking industry and the selected macroeconomic variables exist. The exchange rate, supply side-inflation, and growth have been indicated to negatively influence credit risk rate in Islamic banking, while money supply and Islamic interbank money market rate positively affect the risk rate.
format	Article
author	Nursechafia, Nursechafia Abduh, Muhamad
author_facet	Nursechafia, Nursechafia Abduh, Muhamad
author_sort	Nursechafia, Nursechafia
title	The susceptibility of Islamic banks’ credit risk towards macroeconomic variables
title_short	The susceptibility of Islamic banks’ credit risk towards macroeconomic variables
title_full	The susceptibility of Islamic banks’ credit risk towards macroeconomic variables
title_fullStr	The susceptibility of Islamic banks’ credit risk towards macroeconomic variables
title_full_unstemmed	The susceptibility of Islamic banks’ credit risk towards macroeconomic variables
title_sort	susceptibility of islamic banks’ credit risk towards macroeconomic variables
publisher	IIUM Institute of Islamic Banking and Finance
publishDate	2014
url	http://irep.iium.edu.my/36510/ http://irep.iium.edu.my/36510/ http://irep.iium.edu.my/36510/1/JIF_3%2C1%2C_p_23-37.pdf
first_indexed	2023-09-18T20:52:19Z
last_indexed	2023-09-18T20:52:19Z
_version_	1777410076664922112

The susceptibility of Islamic banks’ credit risk towards macroeconomic variables

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