Multilayer information spillover networks between oil shocks and banking sectors: Evidence from oil-rich countries |
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| Institution: | 1. Department of Accounting and Finance, United Arab Emirates University, Al Ain, United Arab Emirates;2. Department of Finance and Investment, College of Economics and Administrative Sciences, Imam Mohammad Ibn Saud Islamic University (IMSIU), Riyadh, Saudi Arabia;3. University of Sfax, Higher Institute of Business Administration, Tunisia;4. Department of Management and Engineering, Linköping University, 581 83 Linköping, Sweden;5. Business School, Hunan University, Changsha 410082, PR China;1. Audencia Business School, Research Center: Markets Technology and Society, 8 Route de la Joneliere, 44312 Cedex 3, Nantes, France;2. Heriot Watt University, Accounting, Economics and Finance SEEC, CFI, Edinburgh, Scotland EH14 4AS, UK;1. School of Finance, Zhejiang Gongshang University, Hangzhou 310018, Zhejiang, China;2. School of Finance, Southwestern University of Finance and Economics, Chengdu 611130, Sicuan, China;1. School of Accounting, Finance and Economics, De Montfort University, LE1 9BH, UK;2. Department of Accounting and Finance, Edinburgh Napier University, UK;1. School of Business, Sichuan Normal University, Chengdu 610101, China;2. Business School, Sichuan University, Chengdu 610065, China |
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| Abstract: | There is no doubt that oil price shocks significantly affect oil-producing countries' macroeconomic fundamentals and financial stability, mainly in crisis times. The recent oil price shocks, coupled with the COVID-19 pandemic, motivated us to investigate the connectedness and risk transmission among oil shocks and banking sectors in the Gulf Cooperation Council (GCC) economies from June 30, 2006, to September 9, 2021. Thus, we construct multilayer information spillover networks between oil price shocks and GCC banking sectors. The empirical results show that the Bahrain banking sector depicts the highest connectedness and risk transmission with oil price shocks on the extreme risk spillover layer. In addition, Kuwait and the United Arab Emirates are highly connected to oil demand shocks. Furthermore, we find a substantial increase in extreme risk spillover and volatility spillover layers during the COVID-19 period. The results of this paper have some important implications for regional portfolio risk management, alleviating systemic risk, and developing hedging and investment strategies. |
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