The price of deposit liquidity: banks versus microfinance institutions

Carolina Laureti and Ariane Szafarz

Applied Economics Letters, 2016, vol. 23, issue 17, 1244-1249

Abstract: Using data from Bangladesh, this article finds that the liquidity premium – the difference between the interest paid on illiquid and liquid savings accounts – is higher in commercial banks than in microfinance institutions. One possible interpretation lies in the higher prevalence of time-inconsistency among the poor. The observed difference in liquidity premia could be due to poor time-inconsistent agents willing to forgo interest on illiquid savings accounts in order to discipline their future selves.

Date: 2016
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Working Paper: The Price of Deposit Liquidity: Banks versus Microfinance Institutions (2016)
Working Paper: The Price of Deposit Liquidity: Banks versus Microfinance Institutions (2016)
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DOI: 10.1080/13504851.2016.1148249

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