Multilayer information spillover networks between oil shocks and banking sectors: Evidence from oil-rich countries

Ahmed Elsayed, Nader Naifar, Gazi Uddin and Gang-Jin Wang

International Review of Financial Analysis, 2023, vol. 87, issue C

Abstract: There is no doubt that oil price shocks significantly affect oil-producing countries' macroeconomic fundamentals and financial stability, mainly in crisis times. The recent oil price shocks, coupled with the COVID-19 pandemic, motivated us to investigate the connectedness and risk transmission among oil shocks and banking sectors in the Gulf Cooperation Council (GCC) economies from June 30, 2006, to September 9, 2021. Thus, we construct multilayer information spillover networks between oil price shocks and GCC banking sectors. The empirical results show that the Bahrain banking sector depicts the highest connectedness and risk transmission with oil price shocks on the extreme risk spillover layer. In addition, Kuwait and the United Arab Emirates are highly connected to oil demand shocks. Furthermore, we find a substantial increase in extreme risk spillover and volatility spillover layers during the COVID-19 period. The results of this paper have some important implications for regional portfolio risk management, alleviating systemic risk, and developing hedging and investment strategies.

Keywords: Oil shocks; Banking sectors; Multilayer spillover networks; COVID-19; GCC (search for similar items in EconPapers)
JEL-codes: C32 E44 G15 G21 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:87:y:2023:i:c:s1057521923001187

DOI: 10.1016/j.irfa.2023.102602

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