Sophisticated discipline in a nascent deposit market: Evidence from post-communist Russia
AbstractUsing a database from post-communist, pre-deposit-insurance Russia, we demonstrate the presence of quantity-based sanctioning of weaker banks by both firms and households, particularly after the financial crisis of 1998. Evidence for the standard form of price discipline, however, is notably weak. We estimate the deposit supply function and show that, particularly for poorly capitalized banks, interest rate increases exhibit diminishing, and eventually negative, returns in terms of deposit attraction. These findings are consistent with depositors interpreting the deposit rate itself as a complementary proxy of otherwise unobserved bank-level risk.
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Bibliographic InfoPaper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 13/2006.
Length: 42 pages
Date of creation: 26 Oct 2006
Date of revision:
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market discipline; deposit market; transition; Russia;
Other versions of this item:
- A. Karas & W. Pyle & K. Schoors, 2007. "Sophisticated Discipline in a Nascent Deposit Market: Evidence from Post-Communist Russia," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 07/450, Ghent University, Faculty of Economics and Business Administration.
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- P20 - Economic Systems - - Socialist Systems and Transition Economies - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-11-04 (All new papers)
- NEP-BAN-2006-11-04 (Banking)
- NEP-CIS-2006-11-04 (Confederation of Independent States)
- NEP-COM-2006-11-04 (Industrial Competition)
- NEP-TRA-2006-11-04 (Transition Economics)
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