How Do Changing U.S. Interest Rates Affect Banks in the Gulf Cooperation Council (GCC) Countries?

By Olumuyiwa S Adedeji, Yacoub Alatrash, Divya Kirti

December 6, 2019

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Format: Chicago

Olumuyiwa S Adedeji, Yacoub Alatrash, and Divya Kirti. How Do Changing U.S. Interest Rates Affect Banks in the Gulf Cooperation Council (GCC) Countries?, (USA: International Monetary Fund, 2019) accessed September 18, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Given their pegged exchange rate regimes, Gulf Cooperation Council (GCC) countries usually adjust their policy rates to match shifting U.S. monetary policy. This raises the important question of how changes in U.S. monetary policy affect banks in the GCC. We use bank-level panel data, exploiting variation across banks within countries, to isolate the impact of changing U.S. interest rates on GCC banks funding costs, asset rates, and profitability. We find stronger pass-through from U.S. monetary policy to liability rates than to asset rates and bank profitability, largely reflecting funding structures. In addition, we explore the role of shifts in the quantity of bank liabilities as policy rates change and the role of large banks with relatively stable funding costs to explain these findings.

Subject: Bank soundness, Banking, Central bank policy rate, Commercial banks, Competition, Deposit rates, Financial institutions, Financial markets, Financial sector policy and analysis, Financial services

Keywords: Bank, Bank assets rate, Bank level, Bank soundness, Banks scope, Central bank policy rate, Commercial banks, Competition, Deposit rates, GCC bank assets rate, Global, Liability, Liability rate, Liability structure, Panel data, Rate, Sensitive bank, WP

Publication Details

Pages:

18
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2019/268
Stock No:

WPIEA2019268
ISBN:

9781513519319
ISSN:

1018-5941

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