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

Author/Editor: Poghosyan, Tigran | Hesse, Heiko
Authorized for Distribution: October 1, 2009
Electronic Access: Free Full Text (PDF file size is 1,133KB)
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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.
 
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Series: Working Paper No. 09/220
Subject(s): Banks | Commodity price fluctuations | External shocks | Middle East | North Africa | Oil exporting countries | Oil exports | Oil prices | Oil sector | Profit margins | Profits
Author's keyword(s): bank profitability | oil price shocks | system GMM
 
English  
    Published:   October 1, 2009        
            Format:   Paper
    Stock No:   WPIEA2009220   Pages:   23
    Price:   US$18.00
       
     
Please address any questions about this title to publications@imf.org.