Testing profit and loss sharing to stabilise level of inflation: Evidence from Indonesia

Ghozali Maski; An'im Kafabih; Arif Hoetoro

doi:10.5430/rwe.v9n2p12

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Testing profit and loss sharing to stabilise level of inflation: Evidence from Indonesia

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Ghozali Maski, An'im Kafabih, Arif Hoetoro

2018 Research in World Economy Vol. 9 Issue 2 Article Cited by 0 SDG 8SDG 10

Abstract

The objective of this research is for testing whether profit and loss sharing (PLS) can stabilise inflation compared to interest rate. By using ARDL bound test with monthly data from January 2012 to May 2016, the result shows that PLS that is proxied by national sukuk, mudharabah and musharakah and interest rate simultaneously can affect inflation in Indonesia. Based on coefficient value analysis, PLS that is proxied by national sukuk can stabilise level of inflation in the long run only. Musharakah as other proxy of PLS can stabilise inflation in the short run only. However, mudharabah cannot be used to stabilise inflation both the short run and long run. © 2018, International Journal of Financial Research.

Affiliations

Faculty of Economics and Business, Brawijaya University, Indonesia

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