Digitalisation, social media and bank deposit dynamics : evidence from the recent euro area monetary tightening

This study sheds light on the impact of digitalisation and social media on deposit flows and rates of euro area banks during the recent period of monetary tightening. Drawing on difference-in-differences analysis of confidential monthly data (12/2019 - 10/2023) of deposit flows and rates as well as measures of bank digitalisation and social media exposure through Twitter sentiment, the study offers two novel sets of findings. First, banks with a higher degree of digitalisation exhibit larger fluctuations in deposits, with higher inflows from mid-2020 to early 2022 but greater outflows in response to the tightening. Digitalisation is also correlated with higher sensitivity of banks' NFC deposit rates to policy rates. Second, a negative Twitter sentiment reduces deposit inflows, even after accounting for traditional news' sentiment and a comprehensive set of bank-specific factors, including asset prices and performance indicators.