Liquidity risk in economic uncertainty: Evidence from Indonesian Islamic banks
Purpose – This paper aims to analyze the effect of economic uncertainty on liquidity risk of Islamic banks in Indonesia by observing the impact of economic uncertainty (World Uncertainty Index), macroeconomic factors (GDP Growth and Inflation Rate), and bank-specific factors (CAR and ROA) on liquid...
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| Format: | Article |
| Language: | English |
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Center for Islamic Economics Studies and Development
2022-02-01
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| Series: | Jurnal Ekonomi dan Keuangan Islam |
| Subjects: | |
| Online Access: | https://journal.uii.ac.id/JEKI/article/view/21869 |
| _version_ | 1811341817652707328 |
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| author | Muhammad Anis Baitul Hamdi |
| author_facet | Muhammad Anis Baitul Hamdi |
| author_sort | Muhammad Anis |
| collection | DOAJ |
| description |
Purpose – This paper aims to analyze the effect of economic uncertainty on liquidity risk of Islamic banks in Indonesia by observing the impact of economic uncertainty (World Uncertainty Index), macroeconomic factors (GDP Growth and Inflation Rate), and bank-specific factors (CAR and ROA) on liquidity risk.
Methodology – Using time-series quarterly data from OJK’s Islamic Banking Statistics 2015-2021, this research applies Auto-Regressive Distributed Lag (ARDL) and Error Correction Term (ECT) to see the long-term impact and short-term response of economic uncertainty, inflation rate, GDP growth, ROA and CAR on liquidity risk of Islamic Bank.
Findings – This research finds that economic uncertainty has a positive and significant effect on liquidity risk in the short term and long term. It means the increase in uncertainty index caused by the crisis, war, or pandemic like nowadays will enhance the liquidity risk of Islamic banking. At the same time, the inflation rate has a significant negative effect on liquidity risk in the short-term and long term.
Originality – This research uses a combination of macroeconomic variables and bank-specific factors, and the economic uncertainty variable from the World Uncertainty Index. In this case, one of the reasons for liquidity problems apart from fund management failure is unfavorable economic conditions. In addition, this study also provides several recommendations in maintaining banking liquidity risk.
Research limitations – This study uses time-series data with a limited period (2015Q1-2021Q2). In addition, this uses cumulative data on Islamic banking in Indonesia; thus, it does not describe the conditions in each Islamic bank, although certainly there are some different conditions between each other. Therefore, it is hoped that studies will complement these limitations in the future. |
| first_indexed | 2024-04-13T19:00:42Z |
| format | Article |
| id | doaj.art-c107354050ca4de8a24bd2b01e899c25 |
| institution | Directory Open Access Journal |
| issn | 2088-9968 2614-6908 |
| language | English |
| last_indexed | 2024-04-13T19:00:42Z |
| publishDate | 2022-02-01 |
| publisher | Center for Islamic Economics Studies and Development |
| record_format | Article |
| series | Jurnal Ekonomi dan Keuangan Islam |
| spelling | doaj.art-c107354050ca4de8a24bd2b01e899c252022-12-22T02:34:07ZengCenter for Islamic Economics Studies and DevelopmentJurnal Ekonomi dan Keuangan Islam2088-99682614-69082022-02-018110.20885/jeki.vol8.iss1.art3Liquidity risk in economic uncertainty: Evidence from Indonesian Islamic banksMuhammad Anis0Baitul Hamdi1Islamic Economic Department, Faculty of Economics and Business, Airlangga University, Surabaya, IndonesiaIslamic Economic Department, Faculty of Economics and Business, Airlangga University, Surabaya, Indonesia Purpose – This paper aims to analyze the effect of economic uncertainty on liquidity risk of Islamic banks in Indonesia by observing the impact of economic uncertainty (World Uncertainty Index), macroeconomic factors (GDP Growth and Inflation Rate), and bank-specific factors (CAR and ROA) on liquidity risk. Methodology – Using time-series quarterly data from OJK’s Islamic Banking Statistics 2015-2021, this research applies Auto-Regressive Distributed Lag (ARDL) and Error Correction Term (ECT) to see the long-term impact and short-term response of economic uncertainty, inflation rate, GDP growth, ROA and CAR on liquidity risk of Islamic Bank. Findings – This research finds that economic uncertainty has a positive and significant effect on liquidity risk in the short term and long term. It means the increase in uncertainty index caused by the crisis, war, or pandemic like nowadays will enhance the liquidity risk of Islamic banking. At the same time, the inflation rate has a significant negative effect on liquidity risk in the short-term and long term. Originality – This research uses a combination of macroeconomic variables and bank-specific factors, and the economic uncertainty variable from the World Uncertainty Index. In this case, one of the reasons for liquidity problems apart from fund management failure is unfavorable economic conditions. In addition, this study also provides several recommendations in maintaining banking liquidity risk. Research limitations – This study uses time-series data with a limited period (2015Q1-2021Q2). In addition, this uses cumulative data on Islamic banking in Indonesia; thus, it does not describe the conditions in each Islamic bank, although certainly there are some different conditions between each other. Therefore, it is hoped that studies will complement these limitations in the future.https://journal.uii.ac.id/JEKI/article/view/21869Islamic bankingliquidity RiskWorld Uncertainty Indexinflation rateARDL approach |
| spellingShingle | Muhammad Anis Baitul Hamdi Liquidity risk in economic uncertainty: Evidence from Indonesian Islamic banks Jurnal Ekonomi dan Keuangan Islam Islamic banking liquidity Risk World Uncertainty Index inflation rate ARDL approach |
| title | Liquidity risk in economic uncertainty: Evidence from Indonesian Islamic banks |
| title_full | Liquidity risk in economic uncertainty: Evidence from Indonesian Islamic banks |
| title_fullStr | Liquidity risk in economic uncertainty: Evidence from Indonesian Islamic banks |
| title_full_unstemmed | Liquidity risk in economic uncertainty: Evidence from Indonesian Islamic banks |
| title_short | Liquidity risk in economic uncertainty: Evidence from Indonesian Islamic banks |
| title_sort | liquidity risk in economic uncertainty evidence from indonesian islamic banks |
| topic | Islamic banking liquidity Risk World Uncertainty Index inflation rate ARDL approach |
| url | https://journal.uii.ac.id/JEKI/article/view/21869 |
| work_keys_str_mv | AT muhammadanis liquidityriskineconomicuncertaintyevidencefromindonesianislamicbanks AT baitulhamdi liquidityriskineconomicuncertaintyevidencefromindonesianislamicbanks |