Governments as bankers - how European bonds have substituted bank deposits

Paulo Mourão and Joanna Maria Stawska

Applied Economics, 2020, vol. 52, issue 42, 4605-4620

Abstract: The purpose of this article is to empirically analyse the relationship between marketable securities (government bonds and treasury bills) and bank deposits in European markets. Using a proper database and proper methodological framework, we will analyse this relationship for the last two decades observed in 32 European countries between 1990Q1 and 2018Q2. We specifically focus on the levels of issued treasury bills and government bonds, as well as on their shares in each country’s GDP. Our empirical results suggest the validation of the substitution hypothesis between bank deposits and marketable securities. This means that deposit holders tend to issue bills when they do not find the investment options from banks’ solutions or from bonds’ yields interesting.

Date: 2020
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DOI: 10.1080/00036846.2020.1738328

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