The effect of macroeconomic variables on non performance financing of Islamic Banks in Indonesia
This research is going to discuss about the determinant macro variables andÂ bankâ€™s behavior determinant credit risk on Islamic rural bank in Indonesia. ItÂ could be seen on macro variables such as inflation, exchange rate, Jakarta I slamicÂ index (JII) and money supply (M2), and bankâ€™s behavior such as financing.Â Research methodology used at this study is Vector Error Correction ModelÂ (VECM). Following these procedures, it applies Unit Roots Test, AugmentedÂ Dickey Fuller Test, Lag Length Criteria Test, Correlation Matrix â€“ JohansenÂ Julius Co-integration Test, VECM Estimation, Impulse Response and VarianceÂ Decomposition Test. The result show that both bank behaviors and macroeconomicÂ variables are significant affecting non-performing financing (NPF). TheÂ banking need more careful to manage internal and external factors that influenceÂ non-performing financing (NPF).
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