Research Seminar: private bank deposits and fiscal macro risk in the Euro area

Seminar Abstract

We investigate the relationship between private bank deposits and fiscal/macro risk in the euro area.

Our empirical analysis involves two stages:

1. In the first stage, we use a panel TVP methodology to test for time variation in the relationship between private bank deposits and their underlying fiscal/macro determinants over the period January 1999 – June 2017.
2. The second stage models the time-varying TVP coefficients obtained in the first stage on the level of fiscal and macro risk, accounting for the effects of the introduction of the Outright Transactions Programme (OMT) in August 2012 and the first stage of the European Banking Union (EBU) in November 2014.

We find significant time variation in the relationship between private bank deposits and their fiscal/macro determinants. We also find that this time variation is caused by changes in fiscal/macro risk, with increased fiscal/macro risk prompting deposits flight to safe banking heaven (Germany) and/or cash.

OMT has had a mainly positive effect on deposits in periphery EMU countries but a negative effect in core countries.

Finally, the introduction of EBU has caused a positive deposits effect in core countries but no significant effect in periphery countries.

Our findings suggest that the introduction of the presently incomplete EBU has increased deposits in the countries where an increase is most necessary, i.e. in the crisis-hit countries, and support the EBU’s completion through the introduction of a common European deposit insurance scheme.

Booking

No need to book! Just turn up. please invite colleagues and friends.

Speaker Bio

Michael (BSc, ASOEE; MSc, Queen Mary – London; PhD, Queen Mary - London) is a Reader in Economics at Cardiff Business School.

His research interests are international macroeconomics and finance. He has published numerous articles in journals of international reputation including the Canadian Journal of Economics, Oxford Economic Papers, Journal of International Money and Finance, Journal of Macroeconomics and others.

He has also authored two research monographs relating to the Economics of the single currency.

He is internationally recognised as a leading expert in European economics, providing regular commentary to major international media including the BBC, CNN, Sky News, Voice of America, Bloomberg Radio, Washington Post, Reuters, ABC News, etc.

He also provides regular commentary and opinion articles to reputable Greek media. Michael is a member of the Research Fellows Network of the CESifo Group Munich.

He is also a member of the Scientific Board of the Institute of Democracy Konstantinos Karamanlis, Athens and a member of the Julian Hodge Institute of Applied Macroeconomics.