Liquidity risk in economic uncertainty: Evidence from Indonesian Islamic banks

Purpose – This paper aims to analyze the effect of economic uncertainty on liquidity risk Islamic banks in Indonesia by observing impact (World Uncertainty Index), macroeconomic factors (GDP Growth and Inflation Rate), bank-specific (CAR ROA) risk.Methodology Using time-series quarterly data from OJK’s Banking Statistics 2015-2021, this research applies Auto-Regressive Distributed Lag (ARDL) Error Correction Term (ECT) see long-term short-term response uncertainty, inflation rate, GDP growth, ROA CAR Bank.Findings finds that has a positive significant short term long term. It means increase index caused crisis, war, or pandemic like nowadays will enhance banking. At same time, rate negative term.Originality uses combination variables factors, variable World Index. In case, one reasons for problems apart fund management failure is unfavorable conditions. addition, study also provides several recommendations maintaining banking risk.Research limitations with limited period (2015Q1-2021Q2). cumulative Indonesia; thus, it does not describe conditions each bank, although certainly there are some different between other. Therefore, hoped studies complement these future.