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Peer effects in deposit markets

Cramer, Kim Fe ORCID: 0000-0002-7525-4887 and Koont, Naz (2021) Peer effects in deposit markets. . Social Science Research Network (SSRN). (Submitted)

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Identification Number: 10.2139/ssrn.3930699


We provide first empirical evidence that consumer peer effects matter for banks' deposit demand. Using a novel measure that depicts for each county how exposed peers are to a specific bank in a given year, we tightly identify the causal effect of peer exposure on deposit demand through a fixed effects identification strategy. We address key empirical challenges such as time-invariant homophily. We find that a one percent increase in a bank's peer exposure leads to a 0.05 percent increase in deposit market share. This effect has become stronger over time with the rise of the internet and social media, which facilitate cross-county communication. Peer exposure is especially relevant for smaller banks and customers that have access to the internet.

Item Type: Monograph (Working Paper)
Additional Information: © 2021 The Authors
Divisions: Finance
Subjects: H Social Sciences > HG Finance
JEL classification: G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
Date Deposited: 12 May 2023 14:42
Last Modified: 16 May 2024 12:30

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