Effect of Islamic financial system stability on economic performance in Indonesia
This study constructs a financial stability index for the Islamic financial system of Indonesia using the dynamic factor model and then links it to economic performance employing a nonlinear autoregressive distributed lag (NARDL) model. The financial stability index constructed from a broad range of...
| Main Authors: | , |
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| Format: | Article |
| Published: |
Bank Indonesia Publisher
2022
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| Online Access: | http://psasir.upm.edu.my/id/eprint/101115/ |
| _version_ | 1848863496411807744 |
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| author | Law, Siong Hook M. Ridhwan, Masagus |
| author_facet | Law, Siong Hook M. Ridhwan, Masagus |
| author_sort | Law, Siong Hook |
| building | UPM Institutional Repository |
| collection | Online Access |
| description | This study constructs a financial stability index for the Islamic financial system of Indonesia using the dynamic factor model and then links it to economic performance employing a nonlinear autoregressive distributed lag (NARDL) model. The financial stability index constructed from a broad range of macrofinancial variables captures well the 2008-2009 global financial crisis and the 2020-2021 COVID 19 pandemic crisis periods. The most significant results suggest that positive and negative shocks in Islamic financial stability in the long run increase and decrease economic performance, respectively. The quantile regression results also demonstrate that Islamic financial stability is statistically significant throughout all quantiles in promoting economic performance, although it plays a greater role at lower quantiles and diminishes when the economic performance is at a high level. Our results highlight that the stability of the Islamic financial system deepening would positively enhance economic performance. |
| first_indexed | 2025-11-15T13:33:51Z |
| format | Article |
| id | upm-101115 |
| institution | Universiti Putra Malaysia |
| institution_category | Local University |
| last_indexed | 2025-11-15T13:33:51Z |
| publishDate | 2022 |
| publisher | Bank Indonesia Publisher |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | upm-1011152023-05-23T07:51:15Z http://psasir.upm.edu.my/id/eprint/101115/ Effect of Islamic financial system stability on economic performance in Indonesia Law, Siong Hook M. Ridhwan, Masagus This study constructs a financial stability index for the Islamic financial system of Indonesia using the dynamic factor model and then links it to economic performance employing a nonlinear autoregressive distributed lag (NARDL) model. The financial stability index constructed from a broad range of macrofinancial variables captures well the 2008-2009 global financial crisis and the 2020-2021 COVID 19 pandemic crisis periods. The most significant results suggest that positive and negative shocks in Islamic financial stability in the long run increase and decrease economic performance, respectively. The quantile regression results also demonstrate that Islamic financial stability is statistically significant throughout all quantiles in promoting economic performance, although it plays a greater role at lower quantiles and diminishes when the economic performance is at a high level. Our results highlight that the stability of the Islamic financial system deepening would positively enhance economic performance. Bank Indonesia Publisher 2022-08-30 Article PeerReviewed Law, Siong Hook and M. Ridhwan, Masagus (2022) Effect of Islamic financial system stability on economic performance in Indonesia. Journal of Islamic Monetary Economics and Finance, 8 (3). 371 - 406. ISSN 2460-6146; ESSN: 2460-6618 https://jimf-bi.org/index.php/JIMF/article/view/1567 10.21098/jimf.v8i3.1567 |
| spellingShingle | Law, Siong Hook M. Ridhwan, Masagus Effect of Islamic financial system stability on economic performance in Indonesia |
| title | Effect of Islamic financial system stability on economic performance in Indonesia |
| title_full | Effect of Islamic financial system stability on economic performance in Indonesia |
| title_fullStr | Effect of Islamic financial system stability on economic performance in Indonesia |
| title_full_unstemmed | Effect of Islamic financial system stability on economic performance in Indonesia |
| title_short | Effect of Islamic financial system stability on economic performance in Indonesia |
| title_sort | effect of islamic financial system stability on economic performance in indonesia |
| url | http://psasir.upm.edu.my/id/eprint/101115/ http://psasir.upm.edu.my/id/eprint/101115/ http://psasir.upm.edu.my/id/eprint/101115/ |