COVID-19, Bank Deposits, and Lending
42 Pages Posted: 5 Jul 2020 Last revised: 31 May 2022
Date Written: May 18, 2022
During the pandemic, households accumulated savings in their deposit accounts as a result of a reduction in their spending, which occurred due to the restrictions on their mobility. This led to a significant increase in bank deposits for banks located in counties with a larger reduction in spending. Banks, in turn, used these additional funds to issue more real estate loans. This implies that policies that might affect household spending would lead to changes in the volume of deposits in the banking system, which have consequences on banks' loan supply.
Keywords: COVID-19; Bank deposits; Bank lending
JEL Classification: G21, E51
Suggested Citation: Suggested Citation