Oil price fluctuations and economic growth–banking sector nexus: modeling for MENA countries

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Abstract
Purpose: The aim of this paper is to evaluate empirically the impact of oil price fluctuations on the relationship between banking sector development and economic growth in oil-importing MENA countries.Design/methodology/approach: The study used the newly developed panel autoregressive distributed lagged (ARDL) approach in order to address any potential endogeneity between research variables.Findings: The empirical results show a unidirectional causality in the long run from oil price to both economic growth and banking sector development for oil-importing countries. Also, banking sector development not only leads directly to economic growth but also can play a moderator role in the oil price—economic growth nexus.Research limitations/implications: The study has two principal limitations. On the one hand, this study was conducted in a relatively limited sample of countries. On the other hand, the study did not consider others indicators for banking sector development and others macroeconomic variables.Practical implications: The results found have imperative implications for banks' managers, regulators and researchers. Bank managers should be more concerned with the negative repercussions of oil price fluctuations on the development of their banks. The regulatory authorities must emphasize policies and strategies to further strengthen their banking sector in order to alleviate the negative influence of oil price shocks on economic growth. Researchers focused on finance-growth nexus must take into account the potential influence of oil price shocks.Originality/value: The developed conceptual model allows examining to what extent the oil price fluctuations might affect the relationship between economic growth and banking sector development. This effect is neither evaluated nor clarified in the relevant literature.

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