Liquidity Requirements, Bank Deposits and Financial Development

Bibliographic Data

ID9722148
AuthorsNicola Limodio (0000-0001-6393-065X, Bocconi University and CEPR, corresponding author), Francesco Strobbe (World Bank)
Year2023
Volume90
Issue357
Pages240-270
Publication date2023-01-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueEconomica (JOURNAL)
Journal identifiersISSN: 0013-0427 • E-ISSN: 1468-0335
PublisherWiley (PUBLISHER • GB)
DOI10.1111/ecca.12453
OpenAlexW4309190210
LanguageEN
Citations received1
References cited22

In the presence of low trust in the banking system, liquidity requirements can stimulate bank deposits and financial development by enhancing depositor repayment in bad states. We study an unannounced and unexpected policy that increased the liquid assets of Ethiopian banks by 33% in one quarter of 2011, and present three findings consistent with this hypothesis. First, a panel of depositors shows deposit growth among wealthy individuals. Second, a survey reports higher bank deposits in branches opened after the policy in high‐income cities. Third, bank balance sheets and two sources of bank exposure highlight an increase in deposits, loans and branches

Balance sheet · Bank run · Business · Central bank · Economics · Financial system · Market liquidity · Monetary economics · Monetary policy · Quarter (Canadian coin) · Reserve requirement · Banking stability, regulation, efficiency · Finance · Islamic Finance and Banking Studies · Microfinance and Financial Inclusion

Tools

Open DOI