Deposits finance bank lending and serve as means of payment for bank customers. Under uncertain payment flows, deposits are debts with random maturities. Payment outflows drain reserves, and the risk is most prominent when funding markets are under stress and banks are unable to smooth out...

This paper documents a strong connection between payment system and credit supply. The dual role of deposits as financing instruments for banks and means of payment for bank customers implies spillover effects of bank lending. After a bank finances loans with new deposits, the deposit holders'...

We propose a dynamic theory of banking where deposits play the role of productive capital as in the classical Q-theory of investment for non-financial firms. A key conceptual innovation of our theory is that the stock of deposits cannot be perfectly controlled by the bank. Demand deposit...