Energy price shocks and bank credit: sectoral multi-horizon evidence from a resource-rich economy
Abstract
This paper examines the dynamic relationship between energy price volatility and sectoral bank credit allocation in Qatar. It identifies how energy price shocks are associated with credit dynamics across sectors and time horizons and assesses the implications for financial stability in a hydrocarbon-dependent economy. The study employs wavelet coherence (WTC) analysis on monthly data from February 2009 to December 2023 to capture time–frequency linkages and lead–lag dynamics between energy prices and bank credit across aggregate and sectoral credit categories – public sector, real estate, general trade, consumption, services, and other sectors. The sample period spans major economic shocks, including the 2014–2016 oil price collapse, the 2017 diplomatic blockade, the COVID-19 pandemic, and the 2022 FIFA World Cup. The results reveal pronounced sectoral and temporal heterogeneity in the energy–credit relationship. Public sector credit exhibits persistent high-magnitude, low-frequency coherence with energy prices, reflecting structural dependence on hydrocarbon revenues. General trade displays a countercyclical pattern, with credit growth strengthening during episodes of declining energy prices. Short-term coherence with aggregate credit emerges primarily during periods of economic distress, while medium- and long-term dynamics are driven by fiscal policy transmission and bank risk-taking behavior. Real estate credit shows conditional rather than absolute resilience, with significant short- and medium-term responses during 2014–2015 and 2018–2020 despite limited long-horizon sensitivity. This study provides sector-level, time-frequency evidence on the energy–credit nexus in a hydrocarbon-dependent economy – a context underexplored in the literature. By decomposing credit dynamics across multiple horizons, it uncovers heterogeneous sectoral responses that aggregate and time-invariant approaches commonly obscure.