Deposit Flow Seasonalities and the January Effect in Retail Deposit Rates

54 Pages Posted: 8 Dec 2019

See all articles by Vladimir Kotomin

Vladimir Kotomin

Illinois State University - Department of Finance, Insurance and Law

Artem Meshcheryakov

San Jose State University

Date Written: November 21, 2019

Abstract

Deposits flow out of the US banking system in January and February and flow in later in the year. In response to this outflow, banks increase rates on retail deposit products in January, including time, savings, and money market deposit accounts. Banks tend to offer highest deposit rates in January, after which the rates decline monotonically, reaching the minimum in December. The effect is more pronounced after the financial crisis, when banks relied less on nondeposit borrowings to replace outflowing liquidity. Consistent with the seasonal outflow of deposits, increased reliance on deposits, especially demand deposits, is associated with a stronger January effect in deposit rates at the bank level.

Keywords: Deposit pricing, Flow of funds, January effect

JEL Classification: G12, G21

Suggested Citation

Kotomin, Vladimir and Meshcheryakov, Artem, Deposit Flow Seasonalities and the January Effect in Retail Deposit Rates (November 21, 2019). Available at SSRN: https://ssrn.com/abstract=3491403 or http://dx.doi.org/10.2139/ssrn.3491403

Vladimir Kotomin (Contact Author)

Illinois State University - Department of Finance, Insurance and Law ( email )

Normal, IL 61790
United States

Artem Meshcheryakov

San Jose State University ( email )

United States

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