Assessing the Islamic banking contribution to financial stability in Indonesia: A non-linear approach

Islamic banks have become alternative intermediary institutions in the banking industry and are expected to play a significant role financial system. Therefore, this study aims examine banks’ contribution stability, also focusing on underlying contracts implemented financing activities from perspective of non-linear relationship. The employs time-series data 2006m1 2021m11 adopts autoregressive distributed lag (NARDL). findings reveal that presence has influence stability. Overall symmetric effect but an asymmetric is evident when total categorized based contracts. Moreover, short run, musharakah strengthens while during long-run relationship mudarabah plays most pivotal increasing level stability proposes authorities should be concerned with relationships banks, particularly employ. This considered important avoid instability AcknowledgmentThe authors gratefully acknowledge support Direktorat Penelitian dan Pengabdian Masyarakat (DPPM) Universitas Islam Indonesia No.: 023/ Dir/ DPPM/ 70/ Pen.Unggulan/ XII/ 2022 for providing research grant study.