The Geography of Bank Deposits and the Origins of Aggregate Fluctuations

83 Pages Posted: 27 Aug 2021 Last revised: 19 Apr 2023

See all articles by Shohini Kundu

Shohini Kundu

University of California, Los Angeles (UCLA) - Anderson School of Management; Centre for Economic Policy Research (CEPR)

Seongjin Park

UNSW Business School

Nishant Vats

Washington University in Saint Louis, John M. Olin Business School

Date Written: July 9, 2021

Abstract

What are the aggregate effects of deposit shocks? Using the granular-instrumental-variable methodology, we identify the deposit elasticity of economic growth as 0.87 and the money multiplier as 1.18. We construct deposit shocks by combining a new fact regarding the within-bank geographic concentration of deposits -- 30% of deposits are concentrated in a single county -- with local natural disasters. Large natural disasters in deposit-concentrated areas negatively affect bank deposits and amplify through bank internal capital markets. These shocks can explain 3.30% of the variation in economic growth. Lender and borrower-side frictions are critical for the aggregation of local shocks.

JEL Classification: G21, E44, O47, R11, R12

Suggested Citation

Kundu, Shohini and Park, Seongjin and Vats, Nishant, The Geography of Bank Deposits and the Origins of Aggregate Fluctuations (July 9, 2021). Available at SSRN: https://ssrn.com/abstract=3883605 or http://dx.doi.org/10.2139/ssrn.3883605

Shohini Kundu (Contact Author)

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Seongjin Park

UNSW Business School ( email )

UNSW Business School
High St
Sydney, NSW 2052
Australia

Nishant Vats

Washington University in Saint Louis, John M. Olin Business School ( email )

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