Systemic Risk for Financial Institutions in the Major Petroleum-based Economies: The Role of Oil

Ahmed Khalifa, Massimiliano Caporin, Michele Costola, and Shawkat Hammoudeh
Authors registered in the RePEc Author Service: Massimiliano Caporin

The Energy Journal, 2021, vol. Volume 42, issue Number 6

Abstract: We examine the relationship between oil returns and systemic risk of financial institutions in major petroleum-based economies. By estimating ΔCoVaR, we observe the presence of remarkable increases in risk levels during the financial crises and achieve a better risk measurement when oil returns are included in the risk functions. Moreover, the estimated spread between the CoVaR without and with oil returns is absorbed in a time range that is longer than the duration of the oil shocks. This indicates that drops in oil prices which have a longer effect on risk and financial institutions require more time to account for their impact. Policy implications are also provided.

JEL-codes: F0 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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