The Eurozone deposit rates puzzle: choosing the right benchmarkReport as inadecuate

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1 CES - Centre d-économie de la Sorbonne 2 UvA - University of Amsterdam Amsterdam 3 Université Saint-Louis Bruxelles 4 HEC Paris - Ecole des Hautes Etudes Commerciales

Abstract : The paper proposes an alternative benchmark to the EURIBOR to analyze the post-crisis puzzling behavior of deposit rates in the Eurozone. Using bank-level CDS data for 6 major euro-countries, we build a simple country-level index for banks- cost of unsecured funding. The use of this index instead of the traditionally used EURIBOR restores the cointegration relationship between deposit rates and their reckoned opportunity cost. It also suggests that deposits have actually not been significantly over-remunerated in most euro area countries since the financial crisis, in contrast with what is often argued. Our index appears as a good alternative to the EURIBOR, which we show has become irrelevant for many countries.

Keywords : banks panel estimates cointegration deposit rates euribor

Author: Julien Pinter - Charles Boissel -



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