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The Eurozone deposit rates' puzzle: choosing the right benchmark

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  • Julien Pinter

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, UvA - University of Amsterdam [Amsterdam] = Universiteit van Amsterdam, Université Saint-Louis Bruxelles - Université Saint-Louis Bruxelles)

  • Charles Boissel

    (HEC Paris - Ecole des Hautes Etudes Commerciales)

Abstract

The 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 euro-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 with what is often argued. Our index appears as a good alternative to the EURIBOR, which we show has become irrelevant for many countries.

Suggested Citation

  • Julien Pinter & Charles Boissel, 2016. "The Eurozone deposit rates' puzzle: choosing the right benchmark," Post-Print halshs-01379284, HAL.
  • Handle: RePEc:hal:journl:halshs-01379284
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01379284
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    References listed on IDEAS

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    Cited by:

    1. Julien Pinter, 2022. "Monetarist arithmetic at COVID‐19 time: A take on how not to misapply the quantity theory of money," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 51(2), July.

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    More about this item

    Keywords

    banks; panel estimates; cointegration; deposit rates; euribor;
    All these keywords.

    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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