Munawar Ismail

The contribution of Islamic bank towards the stability of financial system in Indonesia

The objective of this paper is to examine the role of Islamic banks in the stability of financial system in Indonesia. We perform the empirical exercise into two stages. We first employ confirmatory factor analysis to validate the measures of our financial stability. It is found that the performance indicators of Islamic banks have a substantial contribution to the formation of the micro- and macro-prudential dimensions of financial stability together with the institutional Islamic bank dimension itself. Finally, the regression results show that the three aforementioned dimensions of the financial stability play a significant role in determining the stability of the financial system.

Study on empirical characteristic of rural bank sustainability in Indonesia

This study examines the financial sustainability of the Indonesian rural banking industry from 2009:Q1 to 2012:Q3. The study uses the data of 8.104 observations, and is investigated using regression of panel data. The study found that assets, spread of interest rate and capital were the most significant factors influencing the financial sustainability of rural banking industry. Furthermore, a rural bank relying its funding on non-traditional deposits had a stronger financial sustainability. The study also found that, in terms of quality of loan and earning capacity, rural banks that are located in Sumatra region were better than two other regions. However, if the measurement uses a profitability indicator, Java region was better than other regions in the study.

A REGIME SWITCHING ANALYSIS OF INDONESIA'S EXCHANGE MARKET PRESSURE

This paper examines the extent to which the Indonesias currency crisis can be accounted for by macro and micro economic fundamentals by employing Markov-switching approach under cross-generation crisis models. In order to represent the speculative attack in the economy, the study utilized one of the measures that is most widely adopted to signal the breakup of a crisis, the Exchange Market Pressure Index (EMPI). This paper found the following. First, liquidity (DC), real exchange rate (RER2) and ratio of banking credit to GDP (BCred) were found to significantly influence the EMPI, indicating that the behavior of EMPI has the characteristic that is predicted by the first, second, and third generation of crisis model found to significantly influence the EMPI, indicating that the behavior of EMPI has the characteristic that is predicted by the first, second and third generation of crisis models. Second, the LR test showed that regime switching dynamic model is more robust than ordinary dynamic model in explaining the EMPI, suggesting that speculative attacks tend to have the characteristics of multiple equilibria. Third, the transition probability matrix results showed that the tranquility regime was more persistent than the volatile regime.