Liquidity Requirements and Bank Deposits: Evidence from Ethiopia

52 Pages Posted: 6 Jun 2018

Date Written: June 6, 2018

Abstract

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

Limodio, Nicola and Strobbe, Francesco, Liquidity Requirements and Bank Deposits: Evidence from Ethiopia (June 6, 2018). BAFFI CAREFIN Centre Research Paper No. 2018-79. Available at SSRN: https://ssrn.com/abstract=3191928 or http://dx.doi.org/10.2139/ssrn.3191928

Nicola Limodio (Contact Author)

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Francesco Strobbe

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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