Author(s):
Shohini Kundu, Seongjin Park, and Nishant Vats
Date:
June 2022
Abstract:
What are the aggregate effects of deposit shocks? We introduce a new fact regarding the within-bank geographic concentration of deposits — 30% of deposits are concentrated in a single county. We construct deposit shocks by combining the within-bank deposit concentration with local natural disasters. We show that large shocks to deposit concentrated areas amplify through bank internal capital markets and generate aggregate fluctuations. Deposit shocks explain 3.30% of variation in economic growth. We identify the deposit elasticity of economic growth as 0.87 and the money multiplier as 1.18. Lender and borrower-side frictions are critical for the aggregation of local shocks.
Link: The Geography of Bank Deposits and the Origins of Aggregate Fluctuations.