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The Eurozone deposit rates’ puzzle: Choosing the right benchmark

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  • Pinter, Julien
  • Boissel, Charles

Abstract

This paper proposes an alternative benchmark to the EURIBOR to analyze the post-crisis puzzling behavior of deposit rates in the Eurozone. Using bank-level CDS data for 6 major Eurozone countries, we build a simple country-level index for banks’ cost of unsecured funding. The use of this index instead of the traditionally used EURIBOR restores the cointegration relationship between deposit rates and their reckoned opportunity cost. It also suggests that deposits have actually not been significantly over-remunerated in most euro area countries since the financial crisis, in contrast to what is often argued.

Suggested Citation

  • Pinter, Julien & Boissel, Charles, 2016. "The Eurozone deposit rates’ puzzle: Choosing the right benchmark," Economics Letters, Elsevier, vol. 148(C), pages 33-36.
  • Handle: RePEc:eee:ecolet:v:148:y:2016:i:c:p:33-36
    DOI: 10.1016/j.econlet.2016.09.005
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    1. Marco Taboga, 2014. "What Is a Prime Bank? A Euribor–OIS Spread Perspective," International Finance, Wiley Blackwell, vol. 17(1), pages 51-75, March.
    2. Michiel van Leuvensteijn & Christoffer Kok Sørensen & Jacob A. Bikker & Adrian A.R.J.M. van Rixtel, 2013. "Impact of bank competition on the interest rate pass-through in the euro area," Applied Economics, Taylor & Francis Journals, vol. 45(11), pages 1359-1380, April.
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    More about this item

    Keywords

    Deposit rates; Euribor; Cointegration; Panel estimates; Banks;

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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