Financial System Stability in Indonesia during The Global Financial Crisis 2007/2008: Conventional vis-à-vis Islamic

Authors

  • Muh. Rudi Nugroho Faculty of Islamic Economics and Business, State Islamic University Sunan Kalijaga Yogyakarta-Indonesia
  • Ibnu Qizam Faculty of Islamic Economics and Business, State Islamic University Sunan Kalijaga Yogyakarta-Indonesia

DOI:

https://doi.org/10.14421/grieb.2014.022-05

Keywords:

Financial Stability, Z-score, Islamic Banking, Conventional Banking

Abstract

This research aims to analyze the financial stability especially in dual banking system in Indonesia and discusses the role of Islamic banks in the financial stability of national banks. In addition, this study also focuses on the analysis of the determinants of financial stability namely on the national banking Industry. This research uses panel data in which combined data between time series and cross section with an observation periods are 2005:1 - 2009:1 by using an internal variable of banks and macroeconomic data. Z-score analysis will be used as main tool analysis regressed with internal variable. Empirical results obtained from this research shows that during the period of 2005:1 - 2009:1 banking financial stability, for both conventional and Islamic and categorized based on an asset scale, the movement of the Z-score value is different. From the Z-score values analysis shows that Islamic banks are the most stable bank with a trend increased sharply when compared with other banks, namely conventional couterparts. If viewed from each category, small conventional banks more stable than small Islamic banks, and there are declining trend in 2005:1 to 2009:1. Whereas for large and middle conventional banks the trend of the Z-score movement are in the same patterns. This study also founds that the determinant of the banking stability can be seen from two sides namely bank's internal factors and macroeconomic factors. Internal factors consist of: Income Diversity (ID), Credit or Financing (Loan), Total Assets (TA), Operational Cost (Cost), Cost Income (CI), Loan Asset (LA), Current Liability (CL), Cash to Current Liabilities (CCL), Capital Bank (MDL). While macroeconomic factors consist of: inflation, BI Rate, Exchange Rate, Composite Index (JCI), the Gross Domestic Product (GDP). This research also examined the extent to which the role of Islamic banks and the global financial crisis to the financial stability of national banking. This analysis shows that the global financial crisis and Islamic banks affect significantly to the financial stability of banking industries in Indonesia.

Downloads

Download data is not yet available.
Abstract viewed: 730 times | PDF downloaded = 561 times

References

Ainley, Maichael, dkk. 2007. Islamic Finance in the UK: Regulation and Challenges. London. Financial Services Authority

Arifin, Syamsul, Charkes PR Joeshp, dan Shinta Sudrajad. 2007. IMF dan Kestabillan System Keuangan Internasional. Jakarta. Elek Media Komputindo

Choong, Beng Soon dan Ming Hua Liu. 2006. Islamic Banking: Interest Free or Interest Based. SSRN

Erlent, Nier dan Zimzico. 2008. Bank Losses, Monetery Policy and Financial Stability: Evidence on The Interplay from Panel Data. IMF Working Paper

Erwin Hardiyanto. 2007. Mekanisme Transmisi Syariah. Direktorat Penelitian dan Kebijakan Moneter Bank Indonesia

Baltagi, B. H. 1995. Econometric Analysis of Panel Data. New York. John Wiley and Sons

Berg A. dan Pattillo C. 1999. Are Currency Crises Predictable? A Test. IMF Staff Papers. Washington D.C. 46: 107 - 138.

Batunanggar S. 2002. Indonesia’s Banking Crisis Resolution: Lessons and the Way Forward. Di dalam Centre for Central Banking Studies (CCBS), Bank of England dan dipresentasikan pada Banking Crisis Resolution Conference, CCBS, Bank of England, London, 9 December 2002.

Boyd, John H., and David E. Runkle. 1993. Size and Performance of Banking Firms. Journal of Monetary Economics. 31: 47–67.

Cihak, Martin. 2006. How Do Central Banks Write on Financial Stability. IMF Working Paper Washington. International Monetary Fund. 06: 163

Crockett, Andrew. 1997. Why is Financial Stability a Goal of Public Policy. Di dalam Maintaining Financial Stability in a Global Economy Symposium. The Federal Reserve Bank of Kansas City, August 28-30.

Direktorat Perbankan Syariah BI.2009. Outlook Perbankan Syariah Indonesia 2010,Bank Indonesia,Jakarta.

Gregory D Sutton, dan Josef Tošovský. 2005. Potentially endogenous borrowing and developing country sovereign credit ratings. Basel, Switzerland Financial Stability Institute Bank for International Settlements CH-4002

Ishii, Shogo, and Karl Habermeier. 2002. Capital Account Liberalization and Financial Sector Stability.Washington. International Monetary Fund. Occasional Paper No. 211

Marcella Lucchett. 2008. How the Interbank Liquidity Market Affects Financial Stability Policies, University of Verona and SAFE Center, Dipartimento. Di dalam Scienze Economiche. Verona – Italy. Giardino Giusti 2.

Martin Cihak, Heiko Hesse. 2008. Islamic Bank and Financial Stability: An Empirical Analysis. IMF Working Paper

McKinnon, R.I. dan Pill, H. 1994. Credible Liberalization and International Capital Flows the Overborrowing Syndrome. Stanford Univeristy, Stanford.

McFarlane, I.J. 1999. The Stability of Financial System. Reserve Bank of Australia Bulletin. August.

Mingwey, Cristian. 2008. Credit Crunch, Bank Lending, and Monetary Policy: A Model of Financial Intermediation With Heteregoneous Projects. Elsavier.

Mishkin, Frederick. 2001. Financial Policies and the Prevention of Financial Crises in Emerging Market Countries. NBER Working Paper No. 8087. Januari

Moktar, Hamim S., Naziruddin Abdullah, dan Syed M. Al-Habshi. 2006. Efficiency of Islamic Banks in Malaysia: A Stochastic Frontier Approach. Journal of Economic Cooperation among Islamic Countries. 27: 2: 37–70.

Sinclair, P. J. N. 2000. Central Banks and Financial Stability. Bank of England. Quarterly Bulletin. Vol. 40. No. 4. November.

Sundararajan, Vesudavan dan Luca Errico. 2002. Islamic Financial Institution and Products In The Global Financial System. Key Issues In Risk Management Chalanges Ahead. IMF Working Paper.

Verbeek, Marno. 2000. A Guide to Modern Econometrics. New York. John Wiley & Sons

Downloads

Published

2015-09-07

Issue

Section

Articles