Canary in the Coal Mine: Bank Liquidity Shortages and Local Economic Activity

Rajkamal Iyer

No 17633, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper investigates the relation between bank liquidity and local economic activity. We find that an increase in deposit rates offered by banks within a geographic region is associ- ated with contractions in economic activity. As a region heads to an economic downturn, deposit growth slows down, prompting banks to increase deposit rates to support their balance sheet. This increase in deposit rates reflects the liquidity squeeze experienced by banks due to deteriorating economic conditions, which in turn serves as an indicator of an impending economic contraction.

Keywords: Recessions; Banks; Deposit rates (search for similar items in EconPapers)
JEL-codes: E00 G20 (search for similar items in EconPapers)
Date: 2022-11
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP17633 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:17633

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP17633

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().