Liquidity Requirements and Bank Deposits: Evidence from Ethiopia
52 Pages Posted: 6 Jun 2018
Date Written: June 6, 2018
Liquidity requirements can stimulate deposit growth by increasing depositor repayment in bad states, which can also promote lending and branching. We study an unexpected policy change which fostered the liquid assets of Ethiopian banks by 33% in 2011, and present three findings in line with this hypothesis. First, a panel of bank depositors shows deposit growth among wealthy and highly educated individuals. Second, a survey reports higher deposits in branches opened after the policy and in university cities. Third, bank balance sheets and two sources of bank exposure to the policy highlight an increase in deposits, loans and branches.
Keywords: Banking, Liquidity Requirements, Financial Development
JEL Classification: G21, G38, O16
Suggested Citation: Suggested Citation