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Liquidity Requirements and Bank Deposits: Evidence from Ethiopia

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  • Nicola Limodio
  • Francesco Strobbe

Abstract

Liquidity requirements can stimulate deposit growth by increasing depositor repayment in bad states, which can also promote lending and branching. We study an unexpected policy change which fostered the liquid assets of Ethiopian banks by 33% in 2011, and present three findings in line with this hypothesis. First, a panel of bank depositors shows deposit growth among wealthy and highly educated individuals. Second, a survey reports higher deposits in branches opened after the policy and in university cities. Third, bank balance sheets and two sources of bank exposure to the policy highlight an increase in deposits, loans and branches.

Suggested Citation

  • Nicola Limodio & Francesco Strobbe, 2018. "Liquidity Requirements and Bank Deposits: Evidence from Ethiopia," BAFFI CAREFIN Working Papers 1879, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    • Handle: RePEc:baf:cbafwp:cbafwp1879
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    Cited by:

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    More about this item

    Keywords

    Banking; Liquidity Requirements; Financial Development;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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