Sophisticated discipline in a nascent deposit market: Evidence from post-communist Russia

Alexei Karas, William Pyle and Koen Schoors
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William Pyle: BOFIT, Postal: Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland

No 13/2006, BOFIT Discussion Papers from Bank of Finland, Institute for Economies in Transition

Abstract: Using a database from post-communist, pre-deposit-insurance Russia, we demonstrate the presence of quantity-based sanctioning of weaker banks by both firms and households, particularly after the financial crisis of 1998. Evidence for the standard form of price discipline, however, is notably weak. We estimate the deposit supply function and show that, particularly for poorly capitalized banks, interest rate increases exhibit diminishing, and eventually negative, returns in terms of deposit attraction. These findings are consistent with depositors interpreting the deposit rate itself as a complementary proxy of otherwise unobserved bank-level risk.

Keywords: market discipline; deposit market; transition; Russia (search for similar items in EconPapers)
JEL-codes: G21 O16 P20 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-cis, nep-com and nep-tra
Date: 2006-10-26
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Related works:
Working Paper: Sophisticated Discipline in a Nascent Deposit Market: Evidence from Post-Communist Russia (2007)
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Persistent link: http://EconPapers.repec.org/RePEc:hhs:bofitp:2006_013

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