Crude Oil Prices, Financial Stability, and Stock Market Crashes: Evidence from MENA Countries

Abstract

Energy is one of the most basic requirements of modern economic life in the world. The international oil prices and stock markets have important relationships with each other. This paper examines the impact of crude oil price growth on stock market crashes at different levels of financial stability. This paper uses logistic regression and STATA to conduct analysis of data. Using a sample of MENA region countries from 1988 to 2017, we find that crude oil price growth negatively impacts stock market crashes only during the average level of financial stability. The impact is insignificant at either a higher or lower level of financial stability. These results are also robust to controlling for a financial crisis period.