An Empirical Investigation of Oil-Macro-Financial Linkages in Saudi Arabia

February 12, 2016

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Oil-macro-financial linkages in Saudi Arabia are analyzed by applying panel econometric frameworks (multivariate and vector autoregression) to maceoeconomic and bank-level balance sheet data for 9 banks spanning 1999–2014. Lower growth of oil prices and non-oil private sector output leads to slower credit and deposit growth and higher nonperforming loan ratios, with feedback loops within bank balance sheets which in turn dampens economic activity. U.S. interest rates are not found to be a key determinant.

Subject: Banking, Credit, Financial institutions, Financial statements, Money, Nonperforming loans, Oil prices, Prices, Public financial management (PFM), Stocks

Keywords: bank, bank npls, Brent crude, Credit, East Africa, Eastern Europe, equity price, Financial statements, Global, Macro-financial linkages, Middle East, nonperforming loans, North Africa, NPL ratio, oil price, Oil prices, panel vector autoregression, price, price growth, private sector, solvency risk, Stocks, WP

Pages:
23
Volume:
2016
DOI:
https://doi.org/10.5089/9781498330329.001
Issue:
022
Series:
Working Paper No. 2016/022
Stock No:
WPIEA2016022
ISBN:
9781498330329
ISSN:
1018-5941

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