Munawar Ismail, Ghozali Maskie, Dita Nurul Aini
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. Copyright © 2017 Inderscience Enterprises Ltd.
Department of Economics, Faculty of Economics and Business, University of Brawijaya, Jl. Mayjen Haryono 165, Malang, 65145, Indonesia
