Currency Shifts as an Instrument of Market Discipline: Case of Russia

Student: Shapkin Andrei

Educational Programme: Economics (Bachelor)

Final Grade: 9

Year of Graduation: 2016

We aim to discover whether the special mechanism of market discipline exists in the Russian market of individuals’ deposits – the mechanism of currency shifts which means that depositors choose ruble deposits in response to high bank risks. Nowadays, this research is actually relevant in times of bank crisis, non-transparent bank activity and high volatility of exchange rate. The research was carried on panel dataset on 912 banks in Russia between 2005 and 2015. The findings suggest that depositors respond to the bank risks by shifting to another currency. Thus, reliable banks with low risk level demonstrate high proportion of currency deposits and significant growth of deposits in foreign currency. We also analyzed the influence that financial crisis had on the depositors’ sensitivity to bank risks in terms of mechanism of currency shifts.

Full text (added May 12, 2016)

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