Deposit Withdrawals ∗

This paper develops a new approach to identify and quantify different rationales for deposit withdrawals. Exploiting variation in the cost of withdrawal induced by the maturity expiration of time-deposits, the approach can distinguish between withdrawals due to liquidity needs, exposure to fundamental uncertainty, or expectations about how other depositors will behave. Using daily micro-data from a large Greek bank we show that early deposit withdrawal probability quadruples in response to a policy uncertainty shock that doubled the short-run CDS price of Greek sovereign bonds. About two-thirds of this increase is driven by direct exposure to policy uncertainty with the remainder due to changes in expectations of behavior of other depositors. We estimate depositors’ willingness to pay to avoid uncertainty to quantify the effects and find that depositors would have had to be offered annualized returns exceeding 50% to prevent withdrawals during high-uncertainty periods. JEL Classification Codes: D12, D81, G21, O16.