Central Bank Retail Deposits and Bank Runs : Evidence From City-Level Panel Data in Spain, 1922–1934

This paper provides empirical evidence on the behaviour of non-remunerated central bank retail deposits—an analogous deposit facility to retail CBDC—during a bank run in a regime of uninsured bank deposits. I study the 1931 bank run in Spain, following the sudden proclamation of the Second Spanish Republic. I exploit newly collected archival annual and quarterly panel data that allows for capturing the extent of the bank run and the variation in central bank retail deposits at the city level. I complement this dataset with additional higher frequency data and individual central bank depositors’ occupational profile. I document a temporary flight-to-safety from commercial bank deposits to central bank retail deposits in cities where the banking crisis was stronger and a permanent one in those that registered large bank failures. I find that depositors used the central bank retail deposit facility as a protection against eventual nominal losses on their bank deposit balances, but not to seek a refugee from inflation and exchange rate depreciation. Finally, I instrument the city-level incidence of the bank run with a measure of political uncertainty to account for the possibility that the public’s ex ante awareness of the central bank retail deposit facility contributed to deposit withdrawals from banks. Overall, I find that the availability of this facility contributed to alleviate the real consequences of the bank run for financial intermediation