The estimation results show, consistently over all estimation methods and using the two different measures of access to deposits, that greater financial inclusion in the use of bank deposits can help enhance banking sector stability by mitigating the vulnerability of bank deposit base. Namely, the estimated coefficient on the Honohan(2008) and D-K&K(2012) variables indicate that a 10 percent increase in the share of people that have access to or actively use bank deposits can mitigate the deposit growth declines (or deposit withdrawal rates) by three to four percentage points. Recall that, on average, the maximum drop in deposit growth worldwide was 20 percent, and in MICs that have experienced a banking crisis around 2008, the drop averaged around 50 percent (Figure 4). Also, note that the explanatory power of the regressions is satisfactory, with adjusted R-squared between 0.2 and 0.3. The conditioning set of variables thus adequately tests the relevance of variables measuring access to bank deposits in explaining declines in deposit growth in the period of the 2008 global financial crisis.

The most important conditioning variables that consistently appear to be significant in explaining the deposit growth declines around 2008 are the level of economic development (gnipc), the experience of a banking crisis (bc), and the aggregate stability of the banking system (z-score). Namely, more developed countries suffered greater confidence shock and withdrawal of deposits during the 2008 crisis than less developed counties, which could contrast with experience from previous banking crises. Further, the occurrence of a banking crisis around 2008 added about 10 percentage points to deposit growth slowdown, on average, in our sample countries. A higher z-score, the measure of banking sector stability, significantly reduces the drop in deposit growth. Similarly, countries with explicit public deposit insurance have experienced consistently lower declines in deposit growth during the 2008 crisis period. In addition, countries that have mobilized more deposits in relation to their GDP could suffer smaller deposit slowdowns during crises. The evidence on the effect, however, is not robust across different estimation methods. Overall, the coefficients on all significant control variables thus bear the expected sign.

When we inspect the estimation results with the view to possible country heterogeneity, the results seem to indicate that the relationship between access to deposits and the stability of bank deposit funding could vary across country groups at a different stage of economic development (see also section 2). Our hypothesis is that middle-income countries could benefit from a greater synergy between improving access to deposits together with improvements in banking sector stability (the deposit funding base of banks); that is financial inclusion and stability going in the same direction. This is because LICs face huge financial inclusion gaps and can mobilize much less savings from households that are often consumption-constrained. Moreover, LICs are not as well integrated in global finance to import large amounts of foreign savings, and to be subject to cross-border shocks, including those to depositor confidence. In contrast, access to bank deposits in high-income countries approaches 90–100 percent, and highincome countries focus mainly on fostering financial stability, with only marginal gains from 12