Oil Prices and Bank Profitability: Evidence From Major Oil-Exporting Countries in the Middle East and North Africa

October 1, 2009

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Heiko Hesse, and Tigran Poghosyan. Oil Prices and Bank Profitability: Evidence From Major Oil-Exporting Countries in the Middle East and North Africa, (USA: International Monetary Fund, 2009) accessed September 19, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper analyzes the relationship between oil price shocks and bank profitability. Using data on 145 banks in 11 oil-exporting MENA countries for 1994-2008, we test hypotheses of direct and indirect effects of oil price shocks on bank profitability. Our results indicate that oil price shocks have indirect effect on bank profitability, channeled through country-specific macroeconomic and institutional variables, while the direct effect is insignificant. Investment banks appear to be the most affected ones compared to Islamic and commercial banks. Our findings highlight systemic implications of oil price shocks on bank performance and underscore their importance for macroprudential regulation purposes in MENA countries.

Subject: Bank soundness, Banking, Credit risk, Financial regulation and supervision, Financial sector policy and analysis, Financial services, Inflation, Islamic banking, Oil prices, Prices

Keywords: Bank, Bank behavior, Bank inefficiency, Bank owner, Bank performance, Bank profitability, Bank size, Bank soundness, Bank specialization, Bank type, Credit risk, Cyclical bank lending, East Africa, Global, Inflation, Islamic banking, Macroeconomic factor, Middle East, North Africa, Oil price shock, Oil price shocks, Oil prices, Price, Profitability, Shock variable, System GMM, Terms of bank assets, World oil price, WP

Publication Details

Pages:

23
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2009/220
Stock No:

WPIEA2009220
ISBN:

9781451873672
ISSN:

1018-5941

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