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The study investigates the banks' efficiency in the Gulf Cooperation Council (GCC) countries' members (GCC). The efficiency of the banking sector is a cornerstone in the financial development of a country. It has also become a prominent label in both economic and financial lexicons due to the lucid importance of the financial intermediation function it provides. The banking industry is considered the backbone of the financial system in oil exporting countries of the GCC region. In general, the advancement and stability of the banking sector are inextricably related to the total economic output as measured by the GDP and to the stability of the financial system in particular. This study aims to evaluate how efficient banking is in the six countries of the GCC bloc, and to assess the effect of the oil price shock in 2014 on the bank's efficiency in these countries. This study employs the 2-stage Data Envelopment Analysis (DEA) methodology for this aim. This model assigns efficiency scores for GCC banks over a period of time from 2008 to 2016 in the first stage. The second stage of the model regresses the aforementioned efficiency scores against a variety of financial and macroeconomic variables to depict the main determinants of bank efficiency and to assess the banking sector's resilience to global shocks as well as to macroeconomic conditions. The empirical outcomes of this study indicate that the global financial crisis (GFC) in 2008 and the oil price shock in 2014 had a significant negative impact on the efficiency scores of the GCC banks. The findings also show that domestic macroeconomic indicators have a greater impact on bank efficiency than institutional or bank-specific variables.JEL Classifications: E6, E44, Q4, G21 Doi: 10.28991/ESJ-2022-06-03-07 Full Text: PDF

The motivation for this study is to fill existing gaps in the understanding of the economic impacts of oil price volatility on Gulf Cooperation Council (GCC) economies and to assist in the management of recent oil price shocks following the COVID-19 pandemic. To that end, this paper employs an economy-wide general equilibrium model that embodies Kuwait's economic structure and accounts for its political and economic constraints to quantify asymmetric responses of terms of trade shocks in Kuwait. It highlights impacts on non-energy sectors and 'second-best effects' to draw potentially-applicable lessons for the GCC. The results show that, consistent with expectations in the literature, there is potentially an asymmetric response between equi-proportional terms of trade shocks; yet in the current economic policy environment, this asymmetry is either non-existent for some economic variables or very limited and is significantly smaller than the asymmetry shown to exist in other resource-dependent and specialized economies. The potential asymmetry is mitigated by idiosyncratic adjustment mechanisms, namely the sovereign wealth funds (SWFs) and expatriate labour movement, especially when oligopolies are regulated. Contrary to theory expectations, the results also show there is a weak and limited (reverse) Dutch disease dynamic: specifically, there is a strong resource movement effect of the Dutch disease in Kuwait but an almost non-existent de-industrialization effect. Booms expand mainly nontraded oligopolies' markup along with the energy sector and the SWFs, and raise rent distribution payments to the public. Busts reduce distribution payments and markups of oligopolistic firms, but the latter do not expand into the export market despite the depreciating real exchange rate. The regulation of oligopolies reduces rent-seeking behaviour and renders the economy more open and efficient at managing both high and low oil prices. The economic story behind these dynamics is that economic efficiency is largely reduced due to a high concentration of oligopolies in the public energy, as well as in the private non-energy, sectors; these oligopolies capture terms of trade shocks' rents that detract from growth-enhancing innovation, hampering economic efficiency, competitiveness, and growth. Oligopolistic behaviour is enabled by (a) access to government subsidies; (b) access to expatriate labour whose wages are lower than those of national labour, have flexible contracts, and are therefore able to enter or exit the market with little cost to firms or repercussions to unemployment; (c) limited regulation; and (d) limited incentive to regulation because SWFs have been set up as quasi-industries, offering the government an alternative to industrial expansion and economic diversification. The sterilization of oil revenue through the SWF reduces available investments, further eroding potential reverse Dutch disease dynamics. The implication of this is that Dutch disease during high oil price episodes is not inevitable, but a result of policy choice, the downside of which is that reverse Dutch disease effects remain weak. There are important policy implications from this study which indicate that, even with oil price recovery, GCC's existing economic policy regimes and procyclical fiscal management of oil rents are unsustainable and cannot produce the stated desired economic diversification. Although politically difficult, industrial regulation is a potential path in the GCC's transformation plans to raise economic efficiency, manage oil and non-oil rents, expand non-energy sectors, and enhance economic resiliency in light of continuous oil price volatility.

The motivation for this study is to fill existing gaps in the understanding of the economic impacts of oil price volatility on Gulf Cooperation Council (GCC) economies and to assist in the management of recent oil price shocks following the COVID-19 pandemic. To that end, this paper employs an economy-wide general equilibrium model that embodies Kuwait's economic structure and accounts for its political and economic constraints to quantify asymmetric responses of terms of trade shocks in Kuwait. It highlights impacts on non-energy sectors and 'second-best effects' to draw potentially-applicable lessons for the GCC. The results show that, consistent with expectations in the literature, there is potentially an asymmetric response between equi-proportional terms of trade shocks; yet in the current economic policy environment, this asymmetry is either non-existent for some economic variables or very limited and is significantly smaller than the asymmetry shown to exist in other resource-dependent and specialized economies. The potential asymmetry is mitigated by idiosyncratic adjustment mechanisms, namely the sovereign wealth funds (SWFs) and expatriate labour movement, especially when oligopolies are regulated. Contrary to theory expectations, the results also show there is a weak and limited (reverse) Dutch disease dynamic: specifically, there is a strong resource movement effect of the Dutch disease in Kuwait but an almost non-existent de-industrialization effect. Booms expand mainly nontraded oligopolies' markup along with the energy sector and the SWFs, and raise rent distribution payments to the public. Busts reduce distribution payments and markups of oligopolistic firms, but the latter do not expand into the export market despite the depreciating real exchange rate. The regulation of oligopolies reduces rent-seeking behaviour and renders the economy more open and efficient at managing both high and low oil prices. The economic story behind these dynamics is that economic efficiency is largely reduced due to ...

Nigeria as an oil exporting mono-economy is susceptible to fluctuations in the world oil prices. About 97 percent of the government's revenues are gotten from proceeds from oil export. The study attempts to assess the behaviors of macroeconomic variables in the face of oil price volatility in Nigeria. The empirical evidences reveal that macroeconomic variables were susceptibility to volatility in Oil Price. The theoretical framework is based on the Mundel-Flaming model and adopts the variance decomposition and impulse response functions to explain the dynamic properties of the VAR methodology. The impulse response results reveal that a one standard deviation in oil price will trigger a significant change in RGDP, GEXP, INFLATION and IMPORT both in the short and long run, and IR and EXR significantly only in the short run. Finally, the variance decomposition of RGDP, GEXP and EXR reveals that the variability in them were significantly explained by oil price volatility and other tests ran reveals a consistent result. Therefore, volatility in oil price has direct impact on real GDP, Government expenditure, inflation, interest rate, exchange rate and import. The researchers therefore recommend diversification of the economy to other sectors, financial prudence, sound fiscal policy and the lowering of interest rate to stimulate domestic investment.