Macroeconomic Drivers of Islamic Bank Stability: Evidence from Indonesia and Saudi Arabia with Regulatory Quality as a Moderator

Chandra Zaky Maulana; Maya Panorama; M. Junestrada Diem

doi:10.38156/imka.v6i1.737

Chandra Zaky Maulana UIN Raden Fatah Palembang
Maya Panorama Universitas Islam Negeri Raden Fatah Palembang, Soth Sumatera
M. Junestrada Diem Universitas Islam Negeri Raden Fatah Palembang, Soth Sumatera

DOI: https://doi.org/10.38156/imka.v6i1.737

Keywords: Economic Growth, Inflation, Interest Rate, Exchange Rate, Bank Resilience, Regulatory Quality

Abstract

Banking is among the sectors most vulnerable to economic crises due to its role as a monetary policy transmission mechanism and as a financial intermediary between surplus and deficit units. Consequently, maintaining bank resilience is crucial for sustaining monetary and economic stability. This study aims to examine the effects of economic growth, inflation, interest rates, and exchange rates on bank resilience, measured by Return on Assets (ROA), with regulatory quality employed as a moderating variable. This research adopts a quantitative approach using secondary data from five Islamic commercial banks operating in Indonesia and Saudi Arabia over the period 2019–2023. Panel regression analysis is applied using EViews 12 to capture the relationship between macroeconomic variables and bank resilience across countries and over time. The empirical results indicate that economic growth has a significant negative effect on bank resilience, while interest rates have a positive and significant effect. In contrast, inflation and exchange rates do not show a significant impact on bank resilience. Furthermore, regulatory quality is found to strengthen the influence of economic growth, interest rates, and exchange rates on bank resilience, but it does not moderate the relationship between inflation and bank resilience. These findings highlight the importance of strong regulatory frameworks in enhancing the resilience of Islamic banks. The study provides practical implications for Islamic banking institutions in improving risk management strategies, particularly in responding to global economic uncertainty and macroeconomic volatility.

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