| dc.description.abstract | This thesis examines how oil price shocks affect bank profitability. We use this examination
to assess the implications for financial stability in Norway. Our analysis employs a sample
of commercial banks from 2012 to 2021. To control for persistence in profitability, we use
dynamic panel data with a system generalized method of moments (GMM) estimator.
This thesis differentiates between the direct and indirect effects of oil price shocks, where
we explore the latter through non-linear relationships. The main findings are that oil price
shocks have both a positive and negative impact on Norwegian banks through different
channels. Credit exposure to the oil sector yields a positive, albeit small direct effect on
profitability. Banks with a high level of non-interest income are also positively affected.
Furthermore, we find a non-linear relationship between oil price shocks and inflation on
bank profitability. Our results imply that the impact of the oil price shock is negative for
high inflation levels. We present evidence that the negative effect is due to higher loan
loss provisions. However, the overall assessment is that oil price shocks do not threaten
financial stability. Even so, this thesis points out risk factors that should be considered. | en_US |
