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The Eurozone deposit rates' puzzle: Choosing the right benchmark

Author

Listed:
  • Julien Pinter

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, UvA - University of Amsterdam [Amsterdam] = Universiteit van Amsterdam)

  • Charles Boissel

    (HEC Paris - Ecole des Hautes Etudes Commerciales)

Abstract

This paper proposes an alternative benchmark to the EURIBOR to analyze the post-crisis puzzling behavior of deposit rates in the Eurozone. Using bank-level CDS data for 6 major Eurozone countries, we build a simple country-level index for banks' cost of unsecured funding. The use of this index instead of the traditionally used EURIBOR restores the cointegration relationship between deposit rates and their reckoned opportunity cost. It also suggests that deposits have actually not been significantly over-remunerated in most euro area countries since the financial crisis, in contrast to what is often argued.

Suggested Citation

  • Julien Pinter & Charles Boissel, 2016. "The Eurozone deposit rates' puzzle: Choosing the right benchmark," Post-Print halshs-01388502, HAL.
    • Handle: RePEc:hal:journl:halshs-01388502
    DOI: 10.1016/j.econlet.2016.09.005
    as

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    References listed on IDEAS

    as
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    3. Anindya Banerjee & Victor Bystrov & Paul Mizen, 2013. "How Do Anticipated Changes to Short‐Term Market Rates Influence Banks' Retail Interest Rates? Evidence from the Four Major Euro Area Economies," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(7), pages 1375-1414, October.
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    Cited by:

    1. Julien Pinter, 2022. "Monetarist arithmetic at COVID‐19 time: A take on how not to misapply the quantity theory of money," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 51(2), July.

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    More about this item

    Keywords

    Banks; Deposit rates; Euribor; Cointegration; Panel estimates;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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