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Oil Prices and Bank Profitability

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Author Info

  • Heiko Hesse
  • Tigran Poghosyan

Abstract

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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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 09/220.

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Length: 23
Date of creation: 01 Oct 2009
Date of revision:
Handle: RePEc:imf:imfwpa:09/220

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Related research

Keywords: Banks; Commodity price fluctuations; External shocks; Oil exporting countries; Oil exports; Oil prices; Oil sector; Profits; bank profitability; banking; exporting countries; bank performance; oil shock; bank profits; bank capitalization; return on assets; bank interest; global shocks; banking industry; bank interest margins; bank balance sheets; revenue source; banking sector; bank behavior; bank interest rate; price fluctuations; capital adequacy; imperfect competition; domestic economy; bank balance sheet; bank of greece; excess liquidity; banking sectors; bank size; perfect competition; bank liquidity; bank owners; banking system; bank profit; bank assets; bank credit; bank managers; oil revenues; banking industries; domestic demand; bank lending;

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Cited by:
  1. Tahsin Saadi Sedik & Oral Williams, 2011. "Global and Regional Spillovers to GCC Equity Markets," IMF Working Papers 11/138, International Monetary Fund.
  2. Sufian, Fadzlan & Habibullah, Muzafar Shah, 2012. "Globalizations and bank performance in China," Research in International Business and Finance, Elsevier, vol. 26(2), pages 221-239.
  3. Mohamed El Hedi Arouri & Christophe Rault, 2010. "Les effets des fluctuations du prix du pétrole sur les marchés boursiers dans les pays du Golfe," Working Papers hal-00507825, HAL.
  4. Barkoulas, John T. & Chakraborty, Atreya & Ouandlous, Arav, 2012. "A metric and topological analysis of determinism in the crude oil spot market," Energy Economics, Elsevier, vol. 34(2), pages 584-591.

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