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Dynamic Banking with Non-Maturing Deposits / Urban Jermann, Haotian Xiang.
- Format:
- Book
- Author/Creator:
- Jermann, Urban.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w31057.
- NBER working paper series no. w31057
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2023.
- Summary:
- The majority of bank liabilities are deposits typically not withdrawn for extended periods. We propose a dynamic model of banks in which depositors forecast banks' leverage and default decisions, and withdraw optimally by trading off current against future liquidity needs. Endogenous deposit maturity creates a time-varying dilution problem that has major effects on bank dynamics. Interest rate cuts produce delayed increases in bank risk which are stronger in low rate regimes. Deposit insurance can exacerbate the deposit dilution and amplify the increase in bank risk.
- Notes:
- Print version record
- March 2023.
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