ECONOMIC POLICY UNCERTAINTY; IMPACT ON FINANCING RISK AND TOTAL FINANCING OF ISLAMIC BANKS

Yudi Siyamto

Abstract

Slowing performance of the global Islamic financial economy amid economic uncertainty has led to a global increase in food commodity inflation due to disruptions in the food commodity supply chain and fertilizer scarcity, which in turn triggers food protectionism. This research focuses on the relationship between Economic Policy Uncertainty (EPU) and financing risk and total financing of Islamic banks in Indonesia. Time series data is used in this study, comprising 96 monthly data from January 2015 to December 2022, with analysis using Pearson correlation statistics. The first finding indicates a negative correlation between Economic Policy Uncertainty (EPU) and financing risk of Islamic banks, with a correlation coefficient of 72.9%. The second finding reveals a positive correlation between Economic Policy Uncertainty (EPU) and financing of Islamic banks, with a correlation value of 69.2%. Lastly, financing risk is negatively associated with financing of Islamic banks, with a correlation value of 94.7%.

Full Text:

PDF

References

Ahir, H., Bloom, N., & Furceri, D. (2023). World Uncertainty Index. World Uncertainty Index. https://worlduncertaintyindex.com/

Al-Thaqeb, S. A., & Algharabali, B. G. (2019). Economic policy uncertainty: A literature review. The Journal of Economic Asymmetries, 20(November), 1–11. https://doi.org/10.1016/j.jeca.2019.e00133

Aljughaiman, A. A., & Salama, A. (2019). Do banks effectively manage their risks? The role of risk governance in the MENA region. Journal of Accounting and Public Policy, 38(5), 1–31. https://doi.org/10.1016/j.jaccpubpol.2019.106680

Azzimonti, M. (2018). Partisan conflict and private investment. Journal of Monetary Economics, 93, 114–131. https://doi.org/10.1016/j.jmoneco.2017.10.007

Bachmann, R., Elstner, S., & Sims, E. R. (2013). Uncertainty and Economic Activity: Evidence from Business Survey Data. American Economic Journal: Macroeconomics, 5(2), 217–249. https://doi.org/10.1257/mac.5.2.217

Baker, S. R., & Bloom, N. (2013). Does Uncertainty Reduce Growth? Using Disasters as Natural Experiments. national bureau of economic research working paper series, 19475(September), 1–34. https://doi.org/10.3386/w19475

Baker, S. R., Bloom, N., & Davis, S. J. (2016). Measuring economic policy uncertainty. The Quarterly Journal of Economics, 131(4), 1593–1636. https://doi.org/10.1093/qje/qjw024

Baker, S. R., Bloom, N., & Davis, S. J. (2023). Economic Policy Uncertainty Index. In Economic Policy Uncertainty Index. http://policyuncertainty.com

Balcilar, M., Gupta, R., & Segnon, M. (2016). The Role of Economic Policy Uncertainty in Predicting U.S. Recessions: A Mixed-frequency Markov-switching Vector Autoregressive Approach. Economics, 10(1), 1–20. https://doi.org/10.5018/economics-ejournal.ja.2016-27

Bank Indonesia. (2022). Sinergi Dan Inovasi: Meningkatkan Kontribusi Ekonomi Dan Keuangan Syariah. Kajian Ekonomi & Keuangan Syariah, November, 1–159.

Barrero, J. M., Bloom, N., & Wright, I. (2017). Short and Long Run Uncertainty. NBER: National Bureau of Economic Research Working paper series, 23676(Agustus), 1–46. https://doi.org/10.3386/w23676

Bloom, N. (2009). The Impact of Uncertainty Shocks. Econometrica, 77(3), 623–685. https://doi.org/10.3982/ECTA6248

Bonaime, A., Gulen, H., & Ion, M. (2018). oes policy uncertainty affect mergers and acquisi-tions? Journal of Financial Economics, 129(3), 115–558. https://doi.org/10.1016/j.jfineco.2018.05.007

Bonsall, S. B., Bozanic, Z., & Fischer, P. E. (2013). What Do Management Earnings Forecasts Convey About the Macroeconomy? Journal of Accounting Research, 51(2), 225–266. https://doi.org/10.1111/1475-679X.12007

Bordo, M. D., Duca, J. V., & Koch, C. (2016). Economic policy uncertainty and the credit channel: Aggregate and bank level U.S. evidence over several decades. Journal of Financial Stability, 26(Oktober), 90–106. https://doi.org/10.1016/j.jfs.2016.07.002

Buch, C. M., Buchholz, M., & Tonzer, L. (2015). Uncertainty, Bank Lending, and Bank-Level Heterogeneity. IMF Economic Review, 63(Desember), 919–954. https://link.springer.com/article/10.1057/imfer.2015.35

Caglayan, M., & Xu, B. (2018). Economic Policy Uncertainty Effects On Credit And Stability Of Financial Institutions. Bulletin of Economic Research, 71(3), 342–347. https://doi.org/10.1111/boer.12175

Caldara, D., Fuentes-Albero, C., & Gilchrist, S. (2016). The macroeconomic impact of financial and uncertainty shocks. European Economic Review, 88(September), 185–207. https://doi.org/10.1016/j.euroecorev.2016.02.020

Chatjuthamard, P., Wongboonsin, P., Kongsompong, K., & Jiraporn, P. (2020). Does economic policy uncertainty influence executive risk-taking incentives? Finance Research Letters, 37(101385), 1–22. https://doi.org/10.1016/j.frl.2019.101385

Chi, Q., & Li, W. (2017). Economic policy uncertainty, credit risks and banks’ lending decisions: Evidence from Chinese commercial banks. China Journal of Accounting Research, 10(1), 33–50. https://doi.org/10.1016/j.cjar.2016.12.001

Cihak, M., & Hesse, H. (2008). Islamic Banks and Financial Stability: An Empirical Analysis. International Monetary Fund, 08(16), 1–29. https://www.imf.org/external/pubs/ft/wp/2008/wp0816.pdf

Çolak, G., Durnev, A., & Qian, Y. (2017). Political Uncertainty and IPO Activity: Evidence from U.S. Gubernatorial Elections. Journal of Financial and Quantitative Analysis, 52(6), 2523–2564. https://doi.org/10.1017/S0022109017000862

Dell’Ariccia, G., Igan, D., Laeven, L., & Tong, H. (2014). Credit booms and macrofinancial stability. Economic Policy, 31(86), 299–355. https://www.elibrary.imf.org/view/IMF071/20264-9781475543407/20264-9781475543407/ch11.xml?language=en&redirect=true

Dzielinski, M. (2012). Measuring economic uncertainty and its impact on the stock market. Finance Research Letters2, 9(3), 167–175. https://doi.org/10.1016/j.frl.2011.10.003

Gujarati, D. N., & Porter, D. C. (2009). Basic Econometric (5 ed.). McGraw –Hill: New York.

Hasan, M., & Dridi, J. (2010). The Effects of the Global Crisis on Islamic and Conventional Banks: A Comparative Study. International Monetary Fund, 10(201), 1–46. https://www.imf.org/external/pubs/ft/wp/2010/wp10201.pdf

He, Z., & Niu, J. (2018). The effect of economic policy uncertainty on bank valuations. Applied Economics Letters, 25(5), 345–347. https://doi.org/10.1080/13504851.2017.1321832

Hu, S., & Gong, D. (2019). Economic policy uncertainty, prudential regulation and bank lending. Finance Research Letters2, 29(Juny), 373–378. https://doi.org/10.1016/j.frl.2018.09.004

Ismawanto, T., Setianegara, R. G., & Effendi, M. R. (2020). Pengaruh dana pihak ketiga, non performing loan, dan capital adequacy ratio terhadap jumlah penyaluran kredit. Akuntabel: Jurnal Akuntansi dan Keuangan, 17(1), 29–37. https://doi.org/10.30872/jakt.v17i1.6658

Jurado, K., Ludvigson, S. C., & Ng, S. (2015). Measuring Uncertainty. American Economic Review, 105(3), 1177–1216. https://doi.org/10.1257/aer.20131193

Karadima, M., & Louri, H. (2021). Economic policy uncertainty and non-performing loans: The moderating role of bank concentration. Finance Research Letters, 38(January), 1–5. https://doi.org/10.1016/j.frl.2020.101458

Kesuma, M. (2018). Pengaruh Perubahan NPL (Non Performing Loan) Terhadap Penyaluran Kredit pada PT Bank Sumut Cabang Stabat. Jurnal Riset Akuntansi & Bisnis, 18(1), 27–38. https://doi.org/10.30596/jrab.v18i1.2047

Khairiyah, N. M., Fardafa, A., & Arazy, D. R. (2022). Pengaruh car, npl, dan ldr terhadap penyaluran kredit pada bank konvensional yang terdaftar di BEI periode 2017-2021. INOVASI: Jurnal Ekonomi, Keuangan dan Manajemen, 18(3), 710–716. https://journal.feb.unmul.ac.id/index.php/INOVASI/article/view/11637

Kurniati, E. R., & Putri, F. E. (2020). Pengaruh Npl, Car, Roa Dan Bi Rate Terhadap Penyaluran Kredit Pada Bank Umum Yang Terdaftar Di Bursa Efek Indonesia Periode 2014-2016. MEDIKONIS: Jurnal Media Komunikasi dan Bisnis, 11(1), 71–84. https://doi.org/10.52659/medikonis.v11i1.28

Liu, Q.-M., Lee, C.-C., & Zhang, R. (2018). Economic Policy Uncertainty and Firms’ Cash Dividend Policies. Proceedings of the 2018 3rd International Conference on Education, E-learning and Management Technology (EEMT 2018), 515–519. https://doi.org/10.2991/iceemt-18.2018.100

Nahar, S., Jubb, C., & Azim, M. I. (2016). Risk governance and performance: a developing country perspective. Managerial Auditing Journal, 31(3), 250–268. https://doi.org/10.1108/MAJ-02-2015-1158

Ng, J., Saffar, W., & Zhang, J. J. (2020). Policy Uncertainty and Loan Loss Provisions in the Banking Industry. Review of Accounting Studies, 25(2), 727–777. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3051494

Oktaviani, O., & Pangestuti, I. R. D. (2012). Pengaruh DPK, ROA, CAR, NPL, Dan Jumlah SBI Terhadap Penyaluran Kredit Perbankan (Studi Pada Bank Umum Go Public di Indonesia Periode 2008-2011). Diponegoro Journal of Management, 1(4), 430–438. https://ejournal3.undip.ac.id/index.php/djom/article/view/1096

Otoritas Jasa Keuangan. (2023). Statistik Perbankan Syariah Januari 2023. https://www.ojk.go.id

Ozili, P. K. (2019). Determinants of Banking Stability in Nigeria. Forthcoming in: CBN Bullion, 43(2), 1–14.

Ozili, P. K. (2021a). Correlations?, Economic policy uncertainty: are there regional and country. International Review of Applied Economics, 35(5), 714–728. https://doi.org/10.1080/02692171.2020.1853075

Ozili, P. K. (2021b). Economic Policy Uncertainty in Banking: A Literature Review. Handbook of Research on Financial Management During Economic Downturn and Recovery, Forthcoming, may 23, 1–23. https://doi.org/10.2139/ssrn.3851426

Ozili, P. K. (2022). Economic policy uncertainty, bank nonperforming loans and loan loss provisions: are they correlated? Asian Journal of Economics and Banking, 6(2), 221–235. https://doi.org/10.1108/AJEB-10-2021-0119

Parashar, S. P., & Venkatesh, J. (2010). How Did Islamic Banks Do During Global Financial Crisis? Banks and Bank Systems, 5(4), 54–62. https://www.researchgate.net/publication/298435983_How_Did_Islamic_Banks_Do_During_Global_Financial_Crisis

Pece, A. M., Simona, O. E. O., & Salisteanu, F. (2015). Innovation and Economic Growth: An Empirical Analysis for CEE Countries. Procedia Economics and Finance, 26(15), 461–467. https://doi.org/10.1016/s2212- 5671(15)00874-6

Peng, Y. C., Han, X., & Li, J. J. (2018). Economic policy uncertainty and corporate financialization. China Industrial Economics, 1, 135–155. https://doi.org/10.19581/j.cnki.ciejournal.20180115.010

Rosalina, R., Enas, E., & Lestari, M. N. (2019). Pengaruh Non Performing Loan (Npl) Terhadap Penyaluran Kredit (Suatu Studi pada Pt. Bank Negara Indonesia yang Terdaftar di Bursa Efek Indonesia Periode 2007-2017). Business Management and Entrepreneurship Journal, 1(4), 14–24. https://jurnal.unigal.ac.id/index.php/bmej/article/view/2332

Rossi, B., & Sekhposyan, T. (2015). Macroeconomic Uncertainty Indices Based on Nowcast and Forecast Error Distributions. American Economic Review2, 105(5), 650–655. https://doi.org/10.1257/aer.p20151124

Sugiyono. (2019). Metode Penelitian Kuantitatif, Kualitatif dan R & D. Bandung: Alfabeta.

Wang, P., Li, X., Shen, D., & Zhang, W. (2020). How does economic policy uncertainty affect the bitcoin market? Research in International Business and Finance, 53(Oktober), 1–18. https://doi.org/10.1016/j.ribaf.2020.101234

Wu, J., Yao, Y., Chen, M., & Jeon, B. N. (2020). Economic uncertainty and bank risk: Evidence from emerging economies. Journal of International Financial Markets, Institutionsand Money, 68(101242), 1–32. https://doi.org/10.1016/j.intfin.2020.101242

Zalla, R. (2017). Economic Policy Uncertainty in Ireland. https://link.springer.com/journal/11293, 45(Maret), 269–271. https://doi.org/10.1007/s11293-017-9536-8

Refbacks

  • There are currently no refbacks.