Oil Price Shocks to Foreign Assets and Liabilities in Saudi Arabia under Pegged Exchange Rate

Nahla Samargandi and Kazi Sohag ()
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Nahla Samargandi: Faculty of Economics and Administration, Center of Research Excellence in Renewable Energy and Power Systems, King Abdulaziz University, Jeddah 21589, Saudi Arabia

Mathematics, 2022, vol. 10, issue 24, 1-15

Abstract: The Saudi economy ought to maintain a significant amount of foreign exchange reserves due to the pegged exchange rate regime. As a hydrocarbon economy, we measure the dynamic response of external assets and liabilities of banks to the international oil price in Saudi Arabia. In the presence of extreme observations, we apply sophisticated frameworks, including cross-quantilograms, quantile-on-quantile and TVP-VAR approaches, to analyze weekly time-series data from 1993 to 2021. Our results from the cross-quantilogram and quantile-on-quantile frameworks demonstrate that foreign assets and liabilities responded asymmetrically to the volatilities of international oil prices under the bullish and bearish states of the market over different memories. The TVP-VAR results indicate that, during the COVID-19 pandemic, the Saudi economy encountered negative net foreign assets, which occurred mainly as a significant plague of international oil prices. Our findings are robust under different estimators.

Keywords: foreign assets; foreign liability; COVID-19 pandemic; Saudi Arabia (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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