Oil price uncertainly and sovereign credit risk in GCC countries: fresh evidence

Aktham Maghyereh and Hussein Abdoh ()
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Hussein Abdoh: The Citadel: The Military College of South Carolina

International Economics and Economic Policy, 2024, vol. 21, issue 2, No 9, 457-482

Abstract: Abstract Given the significant oil price changes during the past two decades, this paper examines the effect of oil price uncertainty on the sovereign credit risk of four Gulf Cooperation Council (GCC) countries (United Arab Emirates, Qatar, Bahrain, and Saudi Arabia). By utilizing the nonparametric local linear dummy variable estimates (LLDVE), we unveil a significant effect of oil uncertainty on the credit risk mainly during the oil price crash of 2014–2015 and to a lesser extent during the early period of the COVID-19 pandemic. This effect, however, is heterogeneous across the GCC countries. Unlike previous studies, our study controls for structural shifts, nonlinearities, and long-term trends in the relationship between oil price uncertainty and credit risk. Our findings hold important policy implications for policymakers and investors.

Keywords: Oil uncertainty; Sovereign credit risk; Nonparametric model; GCC; Oil crises; COVID-19 (search for similar items in EconPapers)
JEL-codes: C1 G15 G18 Q43 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s10368-024-00607-x

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