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Mattresses versus Banks - The Effect of Trust on Portfolio Composition

Author

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  • Tom Coupe

    () (Kyiv School of Economics, Kyiv Economic Institute)

Abstract

This paper adds to the growing literature that studies whether trust affects the financial decisions of people. More specifically, we investigate whether lack of trust in banks can explain why people save their savings in cash, ‘under the mattress’, rather than deposit their savings at the bank. We find a significant effect of lack of trust on the likelihood that a person saves money in cash but also that lack of trust can only provide part of the explanation for the ‘money under the mattress’ phenomenon. Other factors that matter are the financial awareness and access to bank services.

Suggested Citation

  • Tom Coupe, 2011. "Mattresses versus Banks - The Effect of Trust on Portfolio Composition," Discussion Papers 40, Kyiv School of Economics.
  • Handle: RePEc:kse:dpaper:40 Note: Journal of Development Economics
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    File URL: http://repec.kse.org.ua/pdf/KSE_dp40.pdf
    File Function: June 2011
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    References listed on IDEAS

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    1. Markus Knell & Helmut Stix, 2009. "Trust in Banks? Evidence from normal times and from times of crises," Working Papers 158, Oesterreichische Nationalbank (Austrian Central Bank).
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    Cited by:

    1. Dean Karlan & Aishwarya Lakshmi Ratan & Jonathan Zinman, 2014. "Savings by and for the Poor: A Research Review and Agenda," Review of Income and Wealth, International Association for Research in Income and Wealth, pages 36-78.
    2. Stix, Helmut, 2013. "Why do people save in cash? Distrust, memories of banking crises, weak institutions and dollarization," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4087-4106.
    3. Rahul Mehrotra & Vincent Somville & Lore vandewalle, 2016. "Increasing trust in the bank to enhance savings: Experimental evidence from India," CMI Working Papers 1, CMI (Chr. Michelsen Institute), Bergen, Norway.

    More about this item

    Keywords

    trust; bank deposits; cash savings; financial awareness;

    JEL classification:

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

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