European Journal of Economics and Economic Policies: Intervention

The deposit financing gap: another Dutch disease

Huub Meijers * and Joan Muysken * * and Olaf Sleijpen *

Keywords: stock-flow consistent modelling, retail funding gap, mortgage financing


In the last 2 decades, the Netherlands has experienced an increase in real-estate prices, accompanied by an increase in mortgages and a marked decline in household savings. As a consequence, banks are faced with a large retail funding gap: outstanding mortgage debt is insufficiently matched by retail deposits, whereas other funding possibilities of banks have increasingly been constrained – also due to their large foreign exposures.

Traditional macroeconomic models cannot analyse this phenomenon appropriately as they lack a proper model of the financial sector and underestimate the potential for interactions between the monetary and the real sphere. We present a stock-flow consistent approach developed by Godley and Lavoie as a valuable alternative to traditional and New Keynesian macroeconomic models, enabling us to analyse the deposit financing gap for the Netherlands.

Author Notes

Corresponding author: We are grateful to the conference participants of the First World Keynes Conference at Izmir, Turkey, the 10th international conference on Developments in Economic Theory and Policy in Bilbao, Spain, and the 17th Conference of the Research Network Macroeconomics and Macroeconomic Policies (FMM) in Berlin, Germany, and in particular to Dirk Bezemer, Mark Kruidhof and an anonymous referee for valuable comments.

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