Oil price collapse and firm leverage in resource-dependent countries

Sanna Kurronen

No 10/2018, BOFIT Discussion Papers from Bank of Finland Institute for Emerging Economies (BOFIT)

Abstract: This study examines the financial channel between oil price volatility and the resource curse using firm-level data. A collapse in oil prices adversely affects firm borrowing in resource-dependent countries. However, unlike in non-resource-dependent countries where just the resource sector is harmed, both resource and non-resource firms are affected in resource-dependent countries in an oil price collapse. We also find evidence of a flight to quality in lending, implying that the decline in leverage can partly be attributed to a reduction in the credit supply. Our results suggest that oil price volatility operates via the financial channel to impede economic diversification in resource-dependent countries.

JEL-codes: G21 G32 O13 Q02 Q32 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofitp:bdp2018_010

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