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Deposit Insurance and Depositor Behavior: Evidence from Colombia

19 maggio 2021 ore 12:00 - 13:00

Aula Luiss Research Seminars, Sede di Luiss

Speaker: Nicola Limodio, Università Bocconi

Abstract

We exploit an unexpected increase in the Colombian insurance threshold to investigate how depositors respond to higher deposit insurance. Using a monthly depositor-level dataset from a major bank, we find that both the level and growth of deposits rise with higher coverage. This increment is driven by individuals who were fully and nearly-fully insured before the policy. Leveraging depositor-level variation in the share of newly insured deposits, we estimate an elasticity of deposit growth to deposit insurance of 0.4%. A survey of bank customers indicates that higher bank deposits were replenished by reducing cash and other fixed assets.