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Systemic Risk for Financial Institutions in the Major Petroleum-based Economies: The Role of Oil

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  • Ahmed Khalif
  • Massimiliano Caporin
  • Michele Costola
  • Shawkat Hammoudeh

Abstract

We examine the relationship between oil returns and systemic risk of financial institutions in major petroleum-based economies. By estimating ACoVaR, we observe the presence of remarkable increases in risk levels during the financial crises and achieve a better risk measurement when oil returns are included in the risk functions. Moreover, the estimated spread between the CoVaR without and with oil returns is absorbed in a time range that is longer than the duration of the oil shocks. This indicates that drops in oil prices which have a longer effect on risk and financial institutions require more time to account for their impact. Policy implications are also provided.

Suggested Citation

  • Ahmed Khalif & Massimiliano Caporin & Michele Costola & Shawkat Hammoudeh, 2021. "Systemic Risk for Financial Institutions in the Major Petroleum-based Economies: The Role of Oil," The Energy Journal, , vol. 42(6), pages 247-274, November.
    • Handle: RePEc:sae:enejou:v:42:y:2021:i:6:p:247-274
    DOI: 10.5547/01956574.42.6.akha
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    Cited by:

    1. Caporin, Massimiliano & Fontini, Fulvio & Panzica, Roberto, 2023. "The systemic risk of US oil and natural gas companies," Energy Economics, Elsevier, vol. 121(C).
    2. Saif Sallam Alhakimi & Hussein Hamood Sharaf-Addin, 2022. "Investigating the Impact of Oil Prices Changes on Financial Market Efficiency in Saudi Arabia for the Period (1980-2018): ARDL Approach," International Journal of Energy Economics and Policy, Econjournals, vol. 12(1), pages 420-426.

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    More about this item

    Keywords

    Systemic risk; ΔCoVaR; financial institutions; petroleum-based economies;
    All these keywords.

    JEL classification:

    • F0 - International Economics - - General

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