scholarly journals Does the Volatility of Macroeconomic Variables Depress The Profitability of Islamic Banking?

JEJAK ◽  
2020 ◽  
Vol 13 (1) ◽  
pp. 30-42
Author(s):  
Agus Widarjono
Keyword(s):  
Exchange Rate ◽  
Open Economy ◽  
Negative Impact ◽  
Islamic Banking ◽  
Macroeconomic Variables ◽  
Islamic Bank ◽  
Distributed Lag ◽  
Distributed Lag Model ◽  
The Exchange Rate ◽  
The Impact

Islamic banking in Indonesia has been growing rapidly since 2010. The  profitability of Islamic bank depends on Islamic bank characteristics and macroeconomic condition. As a country with an open economy, macroeconomic conditions are very volatile. Through the theory of exchange rate pass through, the exchange rate fluctuation affects domestic prices so that it affects the profits of Islamic bank.  This study analyzes the impact of the instability of the macroeconomic variables, namely the exchange rate and inflation on the profitability of Islamic bank. The instability of inflation and exchange rate are measured using the GARCH  (Generalized Autoregressive Conditional Heteroskedasticity). This study applies ARDL  (Autoregressive Distributed Lag Model). The data used is monthly data starting from January 2011 to June 2018. The results of the study show that the exchange rate and inflation instability depress the profitability of Islamic banki. More interestingly, instability of inflation has a greater negative impact than the instability of exchange rate on Islamic bank profit. The most Islamic bank characteristics influencing Islamic banking profit was bad financing as known as a non performing financing (NPF).

The long-run stability of a small, open economy under crawling peg regime

2002 ◽  
Vol 52 (1) ◽  
pp. 57-78
Author(s):  
S. Çiftçioğlu
Keyword(s):  
Exchange Rate ◽  
Open Economy ◽  
Risk Premium ◽  
Small Open Economy ◽  
Exchange Rate Policy ◽  
Price Stability ◽  
Output Stability ◽  
Long Run ◽  
The Exchange Rate ◽  
The Impact

The paper analyses the long-run (steady-state) output and price stability of a small, open economy which adopts a “crawling-peg” type of exchange-rate regime in the presence of various kinds of random shocks. Analytical and simulation results suggest that with the exception of money demand shocks, an exchange rate policy which involves a relatively higher rate of indexation of the exchange rate to price level is likely to lead to the worsening of price stability for all types of shocks. On the other hand, the impact of adopting such a policy on output stability depends on the type of the shock; for policy shocks to the exchange rate and shocks to output demand, output stability is worsened whereas for the shocks to risk premium of domestic assets, supply price of domestic output and the wage rate, better output stability is achieved in the long run.

scholarly journals Mobile Money Use: The Impact of Macroeconomic Policy and Regulation

Economies ◽  
2021 ◽  
Vol 9 (2) ◽  
pp. 51
Author(s):  
Lorna Katusiime
Keyword(s):  
Exchange Rate ◽  
Interest Rates ◽  
Financial Innovation ◽  
Macroeconomic Policy ◽  
Mobile Money ◽  
Distributed Lag ◽  
Distributed Lag Model ◽  
Long Run ◽  
Short Run ◽  
The Impact

This paper examines the effects of macroeconomic policy and regulatory environment on mobile money usage. Specifically, we develop an autoregressive distributed lag model to investigate the effect of key macroeconomic variables and mobile money tax on mobile money usage in Uganda. Using monthly data spanning the period March 2009 to September 2020, we find that in the short run, mobile money usage is positively affected by inflation while financial innovation, exchange rate, interest rates and mobile money tax negatively affect mobile money usage in Uganda. In the long run, mobile money usage is positively affected by economic activity, inflation and the COVID-19 pandemic crisis while mobile money customer balances, interest rate, exchange rate, financial innovation and mobile money tax negatively affect mobile money usage.

scholarly journals Determinants of Non-Performing Loan in Nepalese Commercial Banks

2017 ◽  
pp. 22-38 ◽  
Author(s):  
Seema Bhattarai
Keyword(s):  
Exchange Rate ◽  
Commercial Banks ◽  
Negative Impact ◽  
Positive Impact ◽  
Percent Level ◽  
Real Effective Exchange Rate ◽  
Macroeconomic Variables ◽  
Effective Exchange ◽  
Effective Exchange Rate ◽  
The Impact

The non-performing loans (NPL) of financial institutions are considered as a significant issue in the context of Nepal for last few decades. The paper aims to identify the impact of macroeconomic variables (GDP, Inflation, and Real Effective Exchange Rate) and bank specific variables (size, change in loan, real lending rate of interest, and share of loan to total assets) on the non-performing loan of the commercial banks in Nepal. The study was conducted mainly with secondary sources. The data were collected for 26 commercial banks covering the period of 2002-2012 with 227 observations. The study found that macroeconomic variables such as the real effective exchange rate have significantly negative impact on non-performing loan. The impact of GDP growth rate was found to be insignificant in this study. One year lagged inflation rate has significant positive impact on non-performing loan. The banks which charge relatively higher real interest rate have higher non-performing loan, which is consistent with the findings of previous studies. The ownership dummy has positive coefficient and significant at one percent level showing that if the bank is government owned the non-performing loan would be higher than that of the private owned banks. As well, more lending in the previous years and current year reduces the non-performing loan since the coefficient of change in loan in current and previous years have negative coefficient and significant at one percent level.Economic Journal of Development Issues Vol. 19 & 20 No. 1-2 (2015) Combined Issue, Page: 22-38

scholarly journals PERANAN KEBIJAKAN MONETER DALAM MENJAGA STABILITAS PEREKONOMIAN INDONESIA SEBAGAI RESPON TERHADAP FLUKTUASI PEREKONOMIAN DUNIA

2007 ◽  
Vol 9 (2) ◽  
pp. 145-177
Author(s):  
M. Maulana Al Arif ◽  
Achmad Tohari
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Open Economy ◽  
Small Open Economy ◽  
Monthly Data ◽  
Vector Autoregressive ◽  
The World ◽  
The Exchange Rate ◽  
The Impact

This paper analyzes the impact of the inflation and the world interest rate on the Indonesian economy and the effectiveness of the Indonesian central bank policy to adopt the domestic macroeconomic fluctuation.Assuming Indonesia as a small-open economy, the Stuctural Vector Autoregressive Model is utilized on the monthly data during the periode of 1999: 1 – 2004: 12 covering the main domestic macroeconomic indicator (output, price, money supply, interest rate and the exchange rate) and the world oil price and world interest rate as the disturbance source.The analysis provides 2 main results, first, the international variables do have impacts on the domestic variables fluctuation, implying the fragility of the domestic economy due to the external shock, second, the monetary policy is effective on supporting the economic growth and stabilizing the price level. However, the Bank Indonesia policy to stabilize the international shock via the exchange rate channel, contributes to a higher impact of the international shock on domestic interest rate.Keywords: monetary policy, business cycle, SVARJEL Classification: E52, E32, C32, F41

scholarly journals Assessment of Macroeconomics Determinants on Islamic Banking Profitability and Liquidity in United Arab Emirates and Tanzania

2021 ◽  
pp. 17-28
Author(s):  
Omar Salim Ali
Keyword(s):  
United Arab Emirates ◽  
Statistical Significance ◽  
Unit Root Test ◽  
Secondary Data ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Macroeconomic Variables ◽  
Islamic Bank ◽  
Distributed Lag ◽  
Per Capita

Aims: This paper studies the determinants of Islamic banking profitability and liquidity in the United Arab Emirates (UAE) and Tanzania. It was comparative study. The study gives empirical comparisons between Islamic banks in United Arab Emirates (UAE) and Tanzania in their performance bases. Study design:   This study covers the samples of five (5) Islamic banks where by two (2) banks from Tanzania that are People Bank of Zanzibar in Islamic branch (PBZIB) and Amana Islamic bank (AIB).  In the side of United Arab Emirates (UAE) three (3) Islamic banks were selected which includes   Dubai Islamic Bank (DIB), First Abu Dhabi Bank (FAD) this is not an IB and Emirates Islamic Bank (EIB).  The study used secondary data of selected variables which employing panel data for the period of ten (10) years from 2010- 2019. Due to data was on panel bases which includes the two independents variables. Methodology: To calculate profitability, the Return on Assets (ROA) was used and in liquidity in IBs deposit ratio (LDR) used to measure the liquidity .The study uses descriptive statistical analysis, correlation, multiple regression analysis for two equations according to settled objectives. The three macroeconomic variables were selected that are Gross Domestic Product per capita (GDP), inflation (INF) and exchange rate (EXCH). An autoregressive distributed lag (ARDL) model was applied because the result becomes mixed in the unit root test. Results: The findings reveal satisfactory evidence that all selected variables are statistical significance in long run relationship except inflation in UAE. The outcomes of the study indicated that selected macroeconomic variables (GDP per capita, Inflation and exchange rates have a major 5% effect on bank profitability and liquidity in Tanzania and the United Arab Emirates. Conclusion: The study therefore recommends the Tanzania Islamic banks should adopt several policies in order to control the liquidity which is very difference like UAE banks.

scholarly journals Does Inflation have Effect on Economic Growth? Empirical Evidence from Pakistan

2020 ◽  
Vol 1 (1) ◽  
pp. 41-52
Author(s):  
Raima Nazar ◽  
Aisha Ambreen ◽  
Sumbal Sabtain
Keyword(s):  
Economic Growth ◽  
Inflation Rate ◽  
Negative Impact ◽  
Annual Data ◽  
Distributed Lag ◽  
Distributed Lag Model ◽  
Lag Model ◽  
Auto Regressive ◽  
The Impact ◽  
Model Technique

Pakistan is one of the developing countries instead of possessing large amount of natural resources like mines, reserves of coal, adequate amount of minerals and oil, But, Pakistan is still deprived of basic necessities of life and suffering from extreme inflation in the country. Therefore, this study is an attempt to synopsis the impact of inflation on GDP of Pakistan. This study mainly focus on the inflation rate from the period 1980 to 2016, time series annual data has been employed in the study. The Auto Regressive Distributed Lag Model technique is applied in the study in order to estimate and analyze the data. The study concludes that inflation indicates negative impact on the GDP of Pakistan and it can only be minimized if all resources of the country are properly allocated and fully utilized.

scholarly journals Monetary Policy Response on Exchange Rate Dynamics: The Case of Indonesia

2017 ◽  
Author(s):  
Ferry Syarifuddin
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Open Economy ◽  
Inflation Targeting ◽  
Exchange Rate Dynamics ◽  
Macroeconomic Indicators ◽  
The Exchange Rate ◽  
The Impact ◽  
Domestic Interest Rate ◽  
Policy Interest

Bank Indonesia has been implementing Enhanced Inflation Targeting Framework (EITF) since few years ago. The main monetary instrument is short term policy interest rate. The policy interest rate, in this regard, may also have significant role in driving the exchange rate to its desired level. Setting appropriate the interest rate to drive the exchange rate is important to drive the actual inflation to its official target. In order to see the response of policy interest rate to exchange rate dynamics as well as the impact of exchange-rate dynamics to macroeconomic indicators, Structural Co-integrating Vector Auto Regression (SC-VAR) in an open economy model, is implemented. Its finding shows that exchange rate dynamic of USD/IDR has significantly positive relationship with domestic interest rate. The increase of the USD/IDR (depreciation) will then push domestic interest rate to increase.

scholarly journals The Impact of Terrorist Attacks on Foreign Exchange Rate: Case Study of Turkish Lira versus Pound Sterling

2016 ◽  
Author(s):  
Mansoor Maitha ◽  
Jehar Mustofa ◽  
Ugur Gok
Keyword(s):  
Exchange Rate ◽  
Negative Impact ◽  
Causal Effect ◽  
Terrorist Attack ◽  
Terrorist Attacks ◽  
Long Run ◽  
Short Run ◽  
The Exchange Rate ◽  
The Impact ◽  
Turkish Lira

In this study the impact of terrorist attacks on exchange rate is estimated. Particularly, the study focuses on Turkish terrorist attacks and its implication on Turkish lira versus pound sterling exchange rate. In order, to find the causal effect the study employed Autoregressive distributive lag (ARDL) bound testing approach as an estimation technique. Accordingly, the analysis reveals that terrorist attack has a negative impact on the exchange rate in both short and long-run. However, the negative effect of terrorism tends to be small in both the short-run and long-run. More precisely, terrorist attack depreciates the exchange rate between Turkish lira and pound sterling by approximately 0.00072 in the next trading day. The long-term effect also shows that terrorist attack depreciates the exchange rate on average by 0.00212.

Macroeconomic factors and stock returns: Evidence from the emerging market of Asia

2018 ◽  
Vol 5 (3) ◽  
pp. 16-20
Author(s):  
Muhammad Asad Saleem Malik ◽  
Saher Touqeer ◽  
Shumaila Zeb
Keyword(s):  
Exchange Rate ◽  
Stock Returns ◽  
Negative Impact ◽  
Positive Impact ◽  
Emerging Market ◽  
Consumer Price Index ◽  
Macroeconomic Factors ◽  
Macroeconomic Variables ◽  
Significant Negative Impact ◽  
The Impact

This study examines the impact of macroeconomic variables on stock returns of Pakistan, India and Sri Lanka for the period of 1997-2014. GMM approach is used to analyze the impact of macroeconomic variables on stock returns. Variables of the study were T-Bills, Exchange Rate, Consumer Price Index (CPI) and the Industrial Production Index (IPI). The results of study show that T-bills rate has significant negative impact while Exchange rate has a significant positive impact on the Stock Returns of the study period.

scholarly journals Validation of J-Curve Hypothesis in the Nigerian Non Oil Sector

2015 ◽  
Vol 8 (1) ◽  
pp. 15
Author(s):  
Jude O. Obasanmi ◽  
Fidelis O. Nedozi
Keyword(s):  
Exchange Rate ◽  
Unit Root Test ◽  
Policy Makers ◽  
Distributed Lag ◽  
Distributed Lag Model ◽  
J Curve ◽  
Oil Export ◽  
Lag Model ◽  
Oil Sector ◽  
The Impact

J-Curve is a term used to describe the impact of currency devaluation on a country’s balance of trade. In carrying out the study, two objectives stated which are; the validation of the j-curve hypothesis in the short (SR) and long runs (LR). Also, the researcher used the OLS in addition to distributed lag model because exchange rate devaluation does not take effect immediately giving room for lag model effect. The study span from 1985-2014. The study adopted its model from Rose and Yellen (1989) and Rose (1990). The unit root test was used to determine the stationarity of the data. From the results, the OLS result showed delayed J-curve hypothesis. Under the distributed lag (DL), the result shows obedience to the J-curve hypothesis. It is concluded that, policy makers should implement the theory only when the aggregate exchange rate differential between export (non oil) and import (all) is continuously greater than one or equal to one in favour of export (non oil export). One of the recommendations of the study is that policy makers should know that in the current competitive globe, no importing economy will relax to see its economy be a dumping ground (import bias), so superior trade policies should be advocated and implemented. The sustenance of development is one of Nigeria’s challenges. The major policy implication of the study is that Nigeria should diversify the economy, deepen its non oil export and improve its infrastructural base.

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