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Private bank deposits and macro/fiscal risk in the euro-area

Michael Arghyrou () and Maria Dolores Gadea

No 7532, CESifo Working Paper Series from CESifo Group Munich

Abstract: We examine the relationship between private bank deposits and macro/fiscal risk in the euro area. We test three hypotheses: First, private bank deposits relative to Germany are determined by macro/fiscal risk factors. Second, this relationship is time-varying. Third, time-variation is driven by the level of macro/fiscal risk. Our findings validate all three tested hypotheses. They also reveal persistent fragmentation between EMU core and periphery banking systems caused by a deficit of trust in periphery banking systems, unmitigated by the introduction of OMT and European Banking Union. Our findings have implications for the introduction of the European Deposits Insurance Scheme (EDIS), for which they offer tentative support.

Keywords: private bank deposits; macro/fiscal risk; Eurozone; TVP panel; fragmentation (search for similar items in EconPapers)
JEL-codes: F30 F36 F45 G11 G15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec
Date: 2019
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