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Determinants of Depositors’ Behaviour: Heterogeneous Panel Estimates

Author

Listed:
  • Leyla Mammadova

    (Central Bank of Azerbaijan Republic)

  • Aytan Mammadova

    (Central Bank of Azerbaijan Republic)

  • Fuad Mammadov

    (Central Bank of Azerbaijan Republic)

  • Leyla Yusifzada

    (Central Bank of Azerbaijan Republic)

Abstract

This paper empirically evaluates determinants of depositors’ behaviour in Azerbaijan. The response of depositors to macroeconomic, alternative investment and bank specific shocks is analyzed by implementing recently developed panel time series methods that are robust to regional heterogeneity and inter-dependencies. We consider that macroeconomic and alternative investment factors are initially exogenous to the banking system and hit all banks simultaneously. Using a monthly panel dataset of Azerbaijan from January 2009 to June 2015, the paper provides new evidence regarding the importance of relationship between deposits and macroeconomic factors, specifically currency risk. The paper highlights the role of currency risk as a determinant of depositors’ behaviour and concludes that its role overshadow the importance of alternative investment and bank specific factors in Azerbaijan. Despite of wide variation in response of depositors to macroeconomic, alternative investment and bank specific shocks, overall, depositors seem more responsive to risks than previous literature have recognized.

Suggested Citation

  • Leyla Mammadova & Aytan Mammadova & Fuad Mammadov & Leyla Yusifzada, 2016. "Determinants of Depositors’ Behaviour: Heterogeneous Panel Estimates," Working Papers 1603, Central Bank of Azerbaijan Republic.
  • Handle: RePEc:aze:wpaper:1603
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    References listed on IDEAS

    as
    1. Eduardo Levy-Yeyati & Marõa Soledad Martõnez Perõa & Sergio L. Schmukler, 2010. "Depositor Behavior under Macroeconomic Risk: Evidence from Bank Runs in Emerging Economies," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(4), pages 585-614, June.
    2. M. Hashem Pesaran, 2006. "Estimation and Inference in Large Heterogeneous Panels with a Multifactor Error Structure," Econometrica, Econometric Society, vol. 74(4), pages 967-1012, July.
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    More about this item

    Keywords

    depositors’ behaviour; macroeconomic risks; official reserves; house price; deposit interest rate;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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