ISSN: 2222-6990
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Macroprudential policy is the approach that is specifically aimed at containing systemic risks and maintaining financial stability in a country. One of the key elements of an effective macroprudential policy framework is a system of early warning indicators that signal increased vulnerabilities to financial stability. The most important macroprudential policy indicators that are used to monitor systemic risk are asset quality and liquidity indicators. The key indicator is capital adequacy ratio. It is also the main prudential and structural Islamic Finance indicators (PSIFIs) on the financial soundness and growth of the Islamic banking systems. This study investigates the relationship between the Capital adequacy ratio and different macroeconomic variables and macroprudential policy elements for twenty (20) selected countries from 2008 until 2017. It is documented that there is statistically significant relationship between the capital adequacy ratio and macroeconomic variables such as gross domestic product, balance of payment, money supply and unemployment rate. For the effect of macroprudential policy instruments and institutional factors it shows that these elements are effective in stabilising the banking system fragility.
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In-Text Citation: (Junos et al., 2021)
To Cite this Article: Junos, S., Ma’in, M., & Jalil, S. A. (2021). Assessing the Impact of Macroeconomic Variables And Macroprudential Policy Elements on the Capital Adequacy Ratio. International Journal of Academic Research in Business and Social Sciences, 11(8), 390–411.
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