The effect of oil prices on bank lending behaviour: evidence from the GCC region

Using the generalized method of moments technique (GMM), we examine whether extreme oil prices' movements affect banks' loans supply in the Gulf Cooperation Council (GCC) region. We find that banks tend to be canny in their lending decision during extreme upward moves in oil prices. Moreover, we find that banks continue to extend their lending supply during the economic slowdown. The current paper sheds light on the bank lending behaviour in the GCC region where oil is the main source of revenue.