Private Bank Deposits and Macro/Fiscal Risk in the Euro-Area

94 Pages Posted: 8 Mar 2019

See all articles by Michael Arghyrou

Michael Arghyrou

University of Piraeus

Beata Smarzynska Javorcik

University of Oxford - Department of Economics

Date Written: 2019

Abstract

We examine the relationship between private bank deposits and macro/fiscal risk in the euro area. We test three hypotheses: First, private bank deposits relative to Germany are determined by macro/fiscal risk factors. Second, this relationship is time-varying. Third, time-variation is driven by the level of macro/fiscal risk. Our findings validate all three tested hypotheses. They also reveal persistent fragmentation between EMU core and periphery banking systems caused by a deficit of trust in periphery banking systems, unmitigated by the introduction of OMT and European Banking Union. Our findings have implications for the introduction of the European Deposits Insurance Scheme (EDIS), for which they offer tentative support.

Keywords: private bank deposits, macro/fiscal risk, Eurozone, TVP panel, fragmentation

JEL Classification: F300, F360, F450, G110, G150

Suggested Citation

Arghyrou, Michael and Smarzynska Javorcik, Beata, Private Bank Deposits and Macro/Fiscal Risk in the Euro-Area (2019). CESifo Working Paper No. 7532. Available at SSRN: https://ssrn.com/abstract=3348721

Michael Arghyrou (Contact Author)

University of Piraeus ( email )

Karaoli & Dimitriou 80
Piraeus, 18534
Greece
19 (Fax)

HOME PAGE: http://ideas.repec.org/e/par104.html

Beata Smarzynska Javorcik

University of Oxford - Department of Economics ( email )

Manor Road Building
Manor Road
Oxford, OX1 3BJ
United Kingdom

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