Published in:Swiss Finance Institute Research Paper ; No. 19-44
Extent:
1 Online-Ressource (80 p)
Language:
English
DOI:
10.2139/ssrn.3280437
Identifier:
Origination:
Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments November 7, 2018 erstellt
Description:
Unemployment insurance (UI) policies are implemented by many countries to lower individual income risk and to automatically stabilize macroeconomic fluctuations. To the extent that these policies are successful, however, they should be reducing precautionary savings and hence bank deposits – households' major saving instrument. In this paper, we use this lower incentive to save and uncover a novel distortionary mechanism through which UI policies affect the economy. In particular, we show that when state UI benefits become more generous bank deposits decrease. Since deposits are the main and uniquely stable funding source for banks, the decrease in deposits squeezes bank commercial lending, which in turn reduces firm investment