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

Heiko Hesse () and Tigran Poghosyan

No 09/220, IMF Working Papers from International Monetary Fund

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 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cwa, nep-ene and nep-mic
Date: 2009-10-09

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Persistent link: http://EconPapers.repec.org/RePEc:imf:imfwpa:09/220

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