BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 13/2006:
Sophisticated discipline in a nascent deposit market: Evidence from post-communist Russia
Alexei Karas ()
, William Pyle and Koen Schoors
Abstract: Using a database from post-communist,
pre-deposit-insurance Russia, we demonstrate the presence of quantity-based
sanctioning of weaker banks by both firms and households, particularly
after the financial crisis of 1998. Evidence for the standard form of price
discipline, however, is notably weak. We estimate the deposit supply
function and show that, particularly for poorly capitalized banks, interest
rate increases exhibit diminishing, and eventually negative, returns in
terms of deposit attraction. These findings are consistent with depositors
interpreting the deposit rate itself as a complementary proxy of otherwise
unobserved bank-level risk.
Keywords: market discipline; deposit market; transition; Russia; (follow links to similar papers)
JEL-Codes: G21; O16; P20; (follow links to similar papers)
42 pages, October 26, 2006
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