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Financial Inclusion for Stability: Access to Bank Deposits and the Deposit Growth during the Global Financial Crisis

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Listed:
  • Han, Rui
  • Melecky, Martin

Abstract

In crisis times, depositors get anxious, can run on banks, and withdraw their deposits. Correlated deposit withdrawals of bank deposits could be mitigated if bank deposits are more diversified, i.e. held by more individuals. This paper examines the link between a broader access to bank deposits prior to the 2008 crisis and the dynamics of bank deposit growth in the crisis, while controlling for relevant covariates. Employing the proxies of Honohan (2008) for access to deposits and of Demirguc-Kunt and Klapper (2012) for the use of bank deposits, the authors find that greater access to bank deposits can make the deposit funding base of banks more resilient in times of financial stress. Policy efforts to enhance financial stability should thus focus not only on macroprudential regulation, but also recognize the positive effect of broader access to bank deposits on financial stability.

Suggested Citation

  • Han, Rui & Melecky, Martin, 2013. "Financial Inclusion for Stability: Access to Bank Deposits and the Deposit Growth during the Global Financial Crisis," MPRA Paper 45157, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:45157
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    References listed on IDEAS

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    1. Alfred Hannig & Stefan Jansen, 2010. "Financial Inclusion and Financial Stability : Current Policy Issues," Finance Working Papers 23124, East Asian Bureau of Economic Research.
    2. Allen, Franklin & Demirguc-Kunt, Asli & Klapper, Leora & Martinez Peria, Maria Soledad, 2016. "The foundations of financial inclusion: Understanding ownership and use of formal accounts," Journal of Financial Intermediation, Elsevier, vol. 27(C), pages 1-30.
    3. Huang, Rocco & Ratnovski, Lev, 2011. "The dark side of bank wholesale funding," Journal of Financial Intermediation, Elsevier, vol. 20(2), pages 248-263, April.
    4. Demombynes, Gabriel & Thegeya, Aaron, 2012. "Kenya's mobile revolution and the promise of mobile savings," Policy Research Working Paper Series 5988, The World Bank.
    5. Hyun Song Shin, 2009. "Reflections on Northern Rock: The Bank Run That Heralded the Global Financial Crisis," Journal of Economic Perspectives, American Economic Association, vol. 23(1), pages 101-119, Winter.
    6. Andrews,Donald W. K. & Stock,James H. (ed.), 2005. "Identification and Inference for Econometric Models," Cambridge Books, Cambridge University Press, number 9780521844413, January.
    7. Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 24(Win), pages 14-23.
    8. Honohan, Patrick, 2008. "Cross-country variation in household access to financial services," Journal of Banking & Finance, Elsevier, vol. 32(11), pages 2493-2500, November.
    9. Prasad, Eswar, 2010. "Financial Sector Regulation and Reforms in Emerging Markets: An Overview," IZA Discussion Papers 5233, IZA Network @ LISER.
    10. Stock, James H & Wright, Jonathan H & Yogo, Motohiro, 2002. "A Survey of Weak Instruments and Weak Identification in Generalized Method of Moments," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(4), pages 518-529, October.
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    Keywords

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    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • 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

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