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Financial instability and oil price fluctuations: evidence from oil exporting developing countries

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  • Brahim Gaies, Khaled Guesmi, Thomas Porcher, Raphael Boroumand
Abstract
How financial market stability in oil exporting developing countries might be impacted by oil price fluctuations in the long term? The purpose of this paper is to answer this question. The present study is based on a sample including 35 net oil-exporting developing countries observed between 1987 and 2011. It mainly evidences that an increase in the oil world price can be advantageous for the domestic banking sector through reducing its fragility, measured by the likelihood of systemic banking crisis. To highlight this result, we estimate three logistic prediction crisis models: the random-effects logistic model, the conditional fixed-effects logistic model and the logistic population-averaged process with robust errors. Additionally, we examine the robustness of these estimations considering the changing interest and control variables and the sub-periods of crises. Our results show that an increase in the oil prices improve the stability of oil exporting financial markets and reduce the occurrence of their systemic banking crisis.

Suggested Citation

  • Brahim Gaies, Khaled Guesmi, Thomas Porcher, Raphael Boroumand, 2020. "Financial instability and oil price fluctuations: evidence from oil exporting developing countries," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 17(1), pages 55-71, June.
    • Handle: RePEc:liu:liucej:v:17:y:2020:i:1:p:55-71
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    References listed on IDEAS

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    Cited by:

    1. Hassan Dargahi & Mehdi Hadian, 2022. "Oil shocks, financial stability and implementing macroeconomics and macro‐prudential policies in an oil‐exporting economy," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(2), pages 2481-2496, April.
    2. Nasim, Asma & Ullah, Subhan & Kim, Ja Ryong & Hameed, Affan, 2023. "Energy shocks and bank efficiency in emerging economies," Energy Economics, Elsevier, vol. 126(C).
    3. Bouazizi, Tarek & Guesmi, Khaled & Galariotis, Emilios & Vigne, Samuel A., 2024. "Crude oil prices in times of crisis: The role of Covid-19 and historical events," International Review of Financial Analysis, Elsevier, vol. 91(C).
    4. Boroumand, Raphaël Homayoun & Porcher, Thomas & Urom, Christian, 2021. "Negative oil price shocks transmission: The comparative effects of the GFC, shale oil boom, and Covid-19 downturn on French gasoline prices," Research in International Business and Finance, Elsevier, vol. 58(C).

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    More about this item

    Keywords

    Energy pricing; Financial markets; Crisis; Panel logit models; Oil prices;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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