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

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Oil Prices and Bank Profitability : Evidence From Major Oil-Exporting Countries in the Middle East and North Africa
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Volume/Issue:
2009/220
Series:
IMF Working Papers
Author(s):
Heiko Hesse, and Tigran Poghosyan
Publisher:
INTERNATIONAL MONETARY FUND
Published Date:
October 2009
DOI:
http://dx.doi.org/10.5089/9781451873672.001
ISBN:
9781451873672
ISSN:
1018-5941
Page:
23
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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