Credit risk,managerial behaviour and macroeconomic equilibrium within dual banking systems: Interest-free vs. interest-based banking industries |
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Affiliation: | 1. Faculty of Economic and Management, National University of Malaysia (UKM), 43600, Bangi, Selangor, Malaysia;2. National University of Malaysia (UKM), 43600, Bangi, Selangor, Malaysia;3. Universiti Teknologi MARA, 40450 Shah Alam, Selangor Malaysia |
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Abstract: | In this paper, an attempt has been made to explore the determinants of credit risk in the banking system with a particular interest toward the Islamic banking industry. We analyze the link between credit risk and a set of bank-specific and macroeconomic along with institutional variables using two complementary approaches. First, we investigate the factors of credit risk using one-step generalized method of moments (GMM) system estimator. Then, we explore the feedback between credit risk and its determinants in a panel vector autoregressive (PVAR) model. We have used a sample of Middle Eastern, North African (MENA) and Asian countries to apply our model. The major purpose of this paper is to find factors that could explain credit risk within the interest-free banking system relative to the interest-based one. |
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Keywords: | NPLs Macro-financial linkages GMM estimator Panel VAR analysis Islamic banking system |
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