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

23 Pages Posted: 13 Oct 2009

See all articles by Heiko Hesse

Heiko Hesse

International Monetary Fund (IMF)

Tigran Poghosyan

International Monetary Fund (IMF)

Date Written: October 2009

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.

Keywords: Banks, Commodity price fluctuations, External shocks, Middle East, North Africa, Oil exporting countries, Oil exports, Oil prices, Oil sector, Profit margins, Profits

Suggested Citation

Hesse, Heiko and Poghosyan, Tigran, Oil Prices and Bank Profitability: Evidence from Major Oil-Exporting Countries in the Middle East and North Africa (October 2009). IMF Working Paper No. 09/220, Available at SSRN: https://ssrn.com/abstract=1486538

Heiko Hesse (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Tigran Poghosyan

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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