Business Cycle with Bank Intermediation in Oil Economies

IMF Working Papers, October 2, 2018

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Business Cycle with Bank Intermediation in Oil Economies

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Bibliographic details

• Authors: Hamid R Tabarraei, Hamed Ghiaie, Asghar Shahmoradi
• Published: October 2, 2018
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781484377727.001

Model overview

• Proposes a micro-founded structural framework that incorporates an active banking sector with an oil-producing sector.
• Primary modeling additions:
  • an interbank market to examine its role on shocks;
  • a national development fund and its linkages to the banking sector and the government.

Role of institutions in shock propagation

• The government and the national development fund directly play key roles in the propagation of the oil shock.
• The banking sector and the labor market have major indirect impacts in spreading shocks through:
  • perfect substitution between the oil and non-oil sectors;
  • interactions mediated by the interbank market.

Key findings

• Incorporating an active banking sector allows analysis of how interbank market dynamics affect transmission of oil price shocks.
• Introducing a national development fund clarifies direct fiscal and institutional channels through which oil shocks propagate.
• Indirect channels—banking sector behavior and labor market substitution between oil and non-oil production—significantly contribute to shock amplification and spread.

Keywords and subject areas (as listed in source)

• Subject: Banking, Commodities, Economic sectors, Labor, Oil, Oil prices, Oil sector, Oil, gas and mining taxes, Prices, Taxes
• Keywords: adjustment cost, Banking, capital stock stock-building, central bank, central bank lending, cost of capital, development fund, DSGE, gas and mining taxes, Global, interest rate, lending branch, market clearing, Oil, oil economy, oil firm, oil price shock, oil price volatility, Oil prices, oil revenue, Oil sector, Oil-exporting countries, Oil-Reserve Fund, WP

Business Cycle with Bank Intermediation in Oil Economies, IMF Working Paper, October 2, 2018.

Content in this bundle

• Business Cycle in Oil-Exporting countries with Bank Intermediation, WP/18/226, October 2018
  • Business Cycle in Oil-Exporting countries with Bank Intermediation, WP/18/226, October 2018 (Markdown version)
  • Business Cycle in Oil-Exporting countries with Bank Intermediation, WP/18/226, October 2018 (PDF)