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Liquidity Requirements and Bank Deposits: Evidence from Ethiopia

Nicola Limodio and Francesco Strobbe

No 1879, BAFFI CAREFIN Working Papers from BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy

Abstract: Liquidity requirements can stimulate deposit growth by increasing depositor repayment in bad states, which can also promote lending and branching. We study an unexpected policy change which fostered the liquid assets of Ethiopian banks by 33% in 2011, and present three findings in line with this hypothesis. First, a panel of bank depositors shows deposit growth among wealthy and highly educated individuals. Second, a survey reports higher deposits in branches opened after the policy and in university cities. Third, bank balance sheets and two sources of bank exposure to the policy highlight an increase in deposits, loans and branches.

Keywords: Banking; Liquidity Requirements; Financial Development (search for similar items in EconPapers)
JEL-codes: G21 G38 O16 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-afr, nep-ban and nep-cfn
Date: 2018
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