Oil Price Fluctuations and US Banks

Paolo Gelain, Marco Lorusso and Saeed Zaman

No 24-11, Working Papers from Federal Reserve Bank of Cleveland

Abstract: We document a sizable effect of oil price fluctuations on US banking variables by estimating an SVAR with sign restrictions as in Baumeister and Hamilton (2019). We find that oil market shocks that lead to a contraction in world economic activity unambiguously lower the amount of bank credit to the US economy, tend to decrease US banks' net worth, and tend to increase the US credit spread. The effects can be strong and long-lasting, or more modest and short-lived, depending on the source of the oil price fluctuations. The effects are stronger for smaller and lower leveraged banks.

Keywords: oil market shocks; Bayesian SVAR models; sign restrictions; bank credit (search for similar items in EconPapers)
JEL-codes: E32 E44 Q35 Q43 (search for similar items in EconPapers)
Pages: 47
Date: 2024-05-21
New Economics Papers: this item is included in nep-ban, nep-ene, nep-fdg and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedcwq:98264

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DOI: 10.26509/frbc-wp-202411

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