Assets, branches, and funding have improved in West Nusa Tenggara (NTB) Islamic banking. Given regional banking vulnerability to macroeconomic swings, external resilience assessment is critical. Inflation, exchange rates, gross domestic product, and Islamic stock index are used to assess banking vulnerability. This study can help policymakers and bankers protect Islamic banking against external shocks, encourage regional growth, and maintain financial stability. Thus, this study uses selected macroeconomic indicators to assess NTB’s Islamic banking resilience. Gross Domestic Regional Product (GDRP), inflation (INF), exchange rate (ER), and Indonesia Stock Market (ISI) were measured monthly from 2010 to 2023. This study used the Early Warning System (EWS) and non-parametric signal extraction. All selected factors can be used to quantify NTB’s Islamic banking resilience according to the analysis. Signal extraction also determines the best threshold for each macroeconomic variable and index composite (CIM). Based on visualization results, the interval values that can absorb risk and maintain Islamic banking resilience are (1) GDRP between 3,72 and 6.24%; (2) INF between 1.74 and 1.99%; (3) ER between 0.24 and 0.34%; (4) ISI between 5.96 and 6.26%; and (5) CIM between 0.03 and 1.31. The ideal time horizon for policymakers to make decisions based on each leading variable is also crucial. In addition, the results show that most of the selected macroeconomic variables have a short time horizon (less than 1 year), indicating that the policy response to banking vulnerability has a fast tolerance to avoid systemic spread. Thus, the findings suggest that Islamic banking resilience requires (1) leading variables to detect risk development, (2) optimal policy intervention time horizon, and (3) optimal monitoring threshold.

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Developing Islamic Banking Resilience in West Nusa Tenggara: Extraction Signal Approach

  • Dimas Bagus Wiranatakusuma,
  • Anggi Aprizal

摘要

Assets, branches, and funding have improved in West Nusa Tenggara (NTB) Islamic banking. Given regional banking vulnerability to macroeconomic swings, external resilience assessment is critical. Inflation, exchange rates, gross domestic product, and Islamic stock index are used to assess banking vulnerability. This study can help policymakers and bankers protect Islamic banking against external shocks, encourage regional growth, and maintain financial stability. Thus, this study uses selected macroeconomic indicators to assess NTB’s Islamic banking resilience. Gross Domestic Regional Product (GDRP), inflation (INF), exchange rate (ER), and Indonesia Stock Market (ISI) were measured monthly from 2010 to 2023. This study used the Early Warning System (EWS) and non-parametric signal extraction. All selected factors can be used to quantify NTB’s Islamic banking resilience according to the analysis. Signal extraction also determines the best threshold for each macroeconomic variable and index composite (CIM). Based on visualization results, the interval values that can absorb risk and maintain Islamic banking resilience are (1) GDRP between 3,72 and 6.24%; (2) INF between 1.74 and 1.99%; (3) ER between 0.24 and 0.34%; (4) ISI between 5.96 and 6.26%; and (5) CIM between 0.03 and 1.31. The ideal time horizon for policymakers to make decisions based on each leading variable is also crucial. In addition, the results show that most of the selected macroeconomic variables have a short time horizon (less than 1 year), indicating that the policy response to banking vulnerability has a fast tolerance to avoid systemic spread. Thus, the findings suggest that Islamic banking resilience requires (1) leading variables to detect risk development, (2) optimal policy intervention time horizon, and (3) optimal monitoring threshold.