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

Author/Editor:

Heiko Hesse ; Tigran Poghosyan

Publication Date:

October 1, 2009

Electronic Access:

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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.

Series:

Working Paper No. 09/220

Subject:

English

Publication Date:

October 1, 2009

ISBN/ISSN:

9781451873672/1018-5941

Stock No:

WPIEA2009220

Format:

Paper

Pages:

23

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