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Oil Price Shocks and Bank Risk around the World

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  • Yi Jin
  • Pengxiang Zhai
  • Zhaobo Zhu

Abstract

This paper provides global evidence that oil price shocks have significant impacts on bank risk. Specifically, all three oil shocks, including oil supply shocks, aggregate demand shocks, and oil specific demand shocks, have positive impacts on bank risk. In particular, oil specific demand shocks have different impacts on bank risk in oil-importing versus oil-exporting countries and in normal times versus the financial crisis period. Moreover, we find that interest rate spread could significantly explain the impacts of oil shocks on bank risk for oil-exporting countries during normal times. Our main results remain valid in various robustness tests.This study provides important practical implications for policy makers, banks, and investors around the world.

Suggested Citation

  • Yi Jin & Pengxiang Zhai & Zhaobo Zhu, 2022. "Oil Price Shocks and Bank Risk around the World," The Energy Journal, , vol. 43(1_suppl), pages 1-28, June.
    • Handle: RePEc:sae:enejou:v:43:y:2022:i:1_suppl:p:1-28
    DOI: 10.5547/01956574.43.SI1.yjin
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    References listed on IDEAS

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    2. Lutz Kilian, 2008. "Exogenous Oil Supply Shocks: How Big Are They and How Much Do They Matter for the U.S. Economy?," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 216-240, May.
    3. Allen N. Berger & Björn Imbierowicz & Christian Rauch, 2016. "The Roles of Corporate Governance in Bank Failures during the Recent Financial Crisis," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 48(4), pages 729-770, June.
    4. I-Hsuan Ethan Chiang & W. Keener Hughen & Jacob S. Sagi, 2015. "Estimating Oil Risk Factors Using Information from Equity and Derivatives Markets," Journal of Finance, American Finance Association, vol. 70(2), pages 769-804, April.
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