Oil prices, credit risks in banking systems, and macro-financial linkages across GCC oil exporters

Artikel

This paper assesses the effect of the recent 2014-2015 oil price slump on the financial stability in the Gulf Cooperation Council (GCC) region. The first objective of this paper is to assess how oil price shock propagates within the macroeconomy and how the macro shocks transmit to GCC banks' balance sheets. This part of the paper implements a System Generalized Method of Moments (GMM) and a Panel Fixed Effect Model to estimate the response of nonperforming loans (NPLs) to its macroeconomic determinants. The second objective of this paper is to assess any negative feedback effects between the GCC banking systems and the economy. The paper, therefore, implements a Panel VAR model to explore the macro-financial linkages between GCC banking systems and the real economy. The results indicate that oil price, non-oil GDP, interest rate, stock prices, and housing prices are major determinants of NPLs across GCC banks and the overall financial stability in the region. Credit risk shock tends to propagate disturbances to non-oil GDP, credit growth, and stock prices across GCC economies. A higher level of NPLs restricts banks' credit growth and can dampen economic growth in these economies. The results support the notion that disturbances in banking systems lead to unwanted economic consequences for the real sector.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: International Journal of Financial Studies ; ISSN: 2227-7072 ; Volume: 4 ; Year: 2016 ; Issue: 4 ; Pages: 1-14 ; Basel: MDPI

Classification and Topics

• Classification: Wirtschaft ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Energy and the Macroeconomy ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
• Subject: oil price slump ; GCC nonperforming loans ; macro-financial linkages

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Alodayni, Saleh
• Event: Veröffentlichung
• (who): MDPI
• (where): Basel
• (when): 2016

Further information

• DOI: doi:10.3390/ijfs4040023
• Handle: http://hdl.handle.net/10419/167816
• Last update: 10.03.2025, 11:42 AM CET