How Did Depositors Respond to Covid-19?

44 Pages Posted: 19 Oct 2020 Last revised: 30 Oct 2020

See all articles by Ross Levine

Ross Levine

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER)

Chen Lin

The University of Hong Kong - Faculty of Business and Economics

Mingzhu Tai

The University of Hong Kong - School of Economics and Finance

Wensi Xie

The Chinese University of Hong Kong (CUHK) - CUHK Business School

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Date Written: October 2020

Abstract

Why did banks experience massive deposit inflows during the first months of the pandemic? Using weekly branch-level data on interest rates and county-level data on COVID-19 cases, we discover that interest rates at bank branches in counties with higher COVID-19 infection rates fell by more than rates at other branches—even branches of the same bank in different counties. When differentiating weeks by the degree of stock market distress and counties by the likely impact of COVID-19 cases on economic anxiety, the evidence suggests that the deposit inflows were triggered by a surge in the supply of precautionary savings.

Suggested Citation

Levine, Ross Eric and Lin, Chen and Tai, Mingzhu and Xie, Wensi, How Did Depositors Respond to Covid-19? (October 2020). NBER Working Paper No. w27964, Available at SSRN: https://ssrn.com/abstract=3714456

Ross Eric Levine (Contact Author)

University of California, Berkeley - Haas School of Business ( email )

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National Bureau of Economic Research (NBER)

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Chen Lin

The University of Hong Kong - Faculty of Business and Economics ( email )

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Hong Kong
China

Mingzhu Tai

The University of Hong Kong - School of Economics and Finance ( email )

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Kennedy Town
Hong Kong

Wensi Xie

The Chinese University of Hong Kong (CUHK) - CUHK Business School ( email )

Cheng Yu Tung Building
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Shatin, N.T.
Hong Kong

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