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Cover IMF Working Papers
Oil Prices and Bank Profitability: Evidence From Major Oil-Exporting Countries in the Middle East and North Africa
Mr. Heiko Hesse and Mr. Tigran Poghosyan
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.
Keywords:
WP; bank; price; oil price shock; profitability; bank profitability; oil price shocks; system GMM; bank inefficiency; bank owner; world oil price; bank specialization; terms of bank assets; bank behavior; macroeconomic factor; bank performance; bank type; shock variable; bank size; cyclical bank lending; Oil prices; Bank soundness; Credit risk; Islamic banking; Inflation; Global; Middle East; North Africa; East Africa