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Comparisons of deposit types and implications of the financial crisis: evidence for U.S. banks

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journal contribution
posted on 19.06.2020 by Anthony Glass, Amangeldi Kenjegaliev, Karligash Glass
This paper makes three diverse contributions. First, whereas the extant literature estimates a single elasticity of substitution/complementarity from an input distance function, we calculate a range of elasticities. Second, we make a substantive contribution to the literature on bank input substitution/complementarity because somewhat surprisingly there has been very little work on this issue. Third, our analysis of the substitutability/complementarity of deposit types for U.S. banks in 2008 - 2015 (crisis and beyond), vis-à-vis 1992 - 2007 (pre-crisis), is, to the best of our knowledge, the first to consider the effect of structural change on elasticities of substitution/complementarity. To account for the extent of the heterogeneity in the U.S. banking industry we estimate random coefficients models, as opposed to standard fixed parameter models. The key empirical findings are the changes in the substitutability/complementarity of the quantities of particular pairs of deposit types between the two sample periods, which points to changes in depositors' preferences across banks' deposit portfolios. To illustrate, for savings deposits, which are characterized by flexibility and liquidity, and time deposits, which are less so and thus have higher interest rates, we find significantly lower quantity complementarity in 2008 - 2015. From this finding we can conclude that savings and time deposits have become more distinct, which we suggest should be reflected in banks' strategic management of their deposit portfolios.

History

School

  • Business and Economics

Department

  • Economics

Published in

International Journal of Finance and Economics

Publisher

John Wiley & Sons Ltd

Version

VoR (Version of Record)

Rights holder

© The Authors

Publisher statement

This is an open access article under the terms of the Creative Commons Attribution (https://creativecommons.org/licenses/by/4.0/) License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.

Acceptance date

18/06/2020

Publication date

2020-08-03

Copyright date

2020

ISSN

1076-9307

eISSN

1099-1158

Language

en

Depositor

Prof Karligash Glass. Deposit date: 18 June 2020

Licence

Exports