Silent Runs in a Dollarized Banking System: Depositor-level Evidence from Financial and Geopolitical Shocks

Tatul Hayruni, Mane Pirumyan () and Aleksandr Shirkhanyan
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Mane Pirumyan: Central Bank of Armenia

No WP-2025-06, Working Papers from Central Bank of Armenia

Abstract: We study depositor behavior during two episodes of systemwide withdrawal pressure in Armenia, a highly dollarized banking system with currency-specific deposit-insurance limits: the 2014 exchange-rate and financial shock and the 2020 geopolitical shock. Using depositor-level administrative data from nine banks covering a large share of household deposits, we analyze early withdrawal behavior when outflows are widespread across the banking system but not centered on an obviously failing institution. We show three main findings. First, withdrawal pressure rises sharply during both episodes, consistent with aggregate uncertainty generating run-like dynamics even absent bank-specific insolvency signals. Second, currency denomination is central: conditional on depositor and account characteristics, foreign-currency deposits are more stable than dram deposits, and the stabilizing effect of deposit insurance is weaker for foreign-currency accounts, consistent with lower coverage and exchange-rate-sensitive effective protection. Third, informational proximity and past experience matter. Insiders withdraw more during the financially interpretable 2014 shock but not during the 2020 geopolitical shock, while prior exposure to the 2014 episode is associated with lower withdrawal propensity in 2020. The results highlight how deposit-insurance design, dollarization, and depositor experience jointly shape funding stability in small open economies exposed to macro-financial and geopolitical shocks.

Keywords: Depositor Behavior; Deposit Insurance; Early Withdrawals; Financial Shock; Geopolitical Shock (search for similar items in EconPapers)
JEL-codes: D81 G01 G21 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2025-12
New Economics Papers: this item is included in nep-fdg, nep-mon and nep-tra
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https://www.cba.am/file_manager/Analytical-materials/DepositWirhdrawals.pdf First version, December 2025 (application/pdf)

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