Risk Sharing and Demand Deposit. An Empirical Note About Regional Interest Rates in Italy

Abstract

Even if the recent deregulation and disintermediation of financial markets have strongly reduced interest rates, some differences among Italian regional interest rates partially persist because of geographic and sector diversification. This could be one of the main reasons of the absence of risk sharing through Italian deposit and credit markets. We test three different types of risk sharing: the first one is a hypothesis of complete risk sharing that is easily refused; the second one is a hypothesis of partial temporary risk sharing that is accepted for most of the North regions; the last one, is a hypothesis of partial risk sharing over time and is accepted with different degrees of robustness for most of the remaining Italian regions.

JEL Classification: E21, G21