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Determinants of Commercial Bank Deposit Growth in Ethiopia

Abstract: 

The study aimed at determining the short and long run impacts of endogenous and exogenous factors on deposit growth of Commercial Bank of Ethiopia for the period 1974/75 - 2013/14. The paper also established the causal relationships that exist between the antecedents and the consequent. In the empirical VECM model, the control variables: Economic Growth, Inflation, Interest Rate, Exchange Rate, Population Growth and Branch Expansion were used to establish the causal relationship and measure their impact on the outcome variable. The estimated results suggest Interest Rate has positive but insignificant impact on deposit growth both in the long-run and short-run while Exchange Rate and Branch Expansion significantly increases bank deposit contemporaneously both in the short run and long-run. Moreover, Population and Economic Growth have a positive relationship with deposit growth but significant only in the long-run. Interestingly, Inflation maintains positive and significant impact on deposit in the long-run and negative in the short-run. Using granger causality test, we found a unidirectional causal flow from Economic Growth to Deposit without any feedback response while deposit has a bi-directional causality with Branch Expansion and Economic Growth implicating Inflation can affect Economic Growth through investment. Finally, with error correction term of -0.0678, full adjustment from actual deposit to equilibrium would require a period of about 15 years, indicating a slow speed of adjustment in each subsequent year.

Corporate Author: 
Ethiopian Economics Association (EEA)
Publisher: 
Ethiopian Economics Association (EEA)
ISBN/ISSN: 
978-99944-54-59-4
Primary Descriptors: 

Deposit, Determinant Factors, VECM, 

Secondary Descriptor: 

Granger Causality and Commercial Bank of Ethiopia 

Geographic Descriptors: 
Ethiopia
Cataloge Date: 
09/28/2017
Broad Subject heading: 
Growth
Call Number: 
330.0963 PRO 2017
Serial Key Title: 
Proceedings of the Fourteenth International Conference on the Ethiopian Economy
Publication catagory: 
Content type: 
Volume: 
I
Year: 
2017
Publication date: 
2017-06-01 00:00:00
Conference Place: 
Addis Ababa, EEA Multi-purpose Building Conference Hall
Place of publication: 
Addis Ababa, Ethiopia
Type of material: 
Book
Current frequency: 
Annualy
Thematic area: 
Macroeconomics, Trade and Industry Related Topics
Conference date: 
July 21 – 23, 2016