How Do Changing U.S. Interest Rates Affect Banks in the Gulf Cooperation Council (GCC) Countries?

Olumuyiwa Adedeji, Yacoub Alatrash and Divya Kirti

No 2019/268, IMF Working Papers from International Monetary Fund

Abstract: Given their pegged exchange rate regimes, Gulf Cooperation Council (GCC) countries usually adjust their policy rates to match shifting U.S. monetary policy. This raises the important question of how changes in U.S. monetary policy affect banks in the GCC. We use bank-level panel data, exploiting variation across banks within countries, to isolate the impact of changing U.S. interest rates on GCC banks funding costs, asset rates, and profitability. We find stronger pass-through from U.S. monetary policy to liability rates than to asset rates and bank profitability, largely reflecting funding structures. In addition, we explore the role of shifts in the quantity of bank liabilities as policy rates change and the role of large banks with relatively stable funding costs to explain these findings.

Keywords: WP; bank; rate; liability; liability rate; GCC bank assets rate; panel data; banks scope; sensitive bank; bank level; bank assets rate; liability structure; Central bank policy rate; Deposit rates; Bank soundness; Competition; Commercial banks; Global (search for similar items in EconPapers)
Pages: 18
Date: 2019-12-06
New Economics Papers: this item is included in nep-ara, nep-mac and nep-mon
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Citations: View citations in EconPapers (1)

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