One reason to exclude demand deposits when estimating a bank's repricing gap is because, by regulation, explicit interest cannot be paid on these deposits.

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Demand deposits are non-interest-bearing accounts, meaning that banks cannot pay explicit interest on them. Therefore, they are excluded when estimating a bank's repricing gap, which measures the difference between the interest rates paid on liabilities and the interest rates earned on assets.

One Reason to Exclude Demand Deposits When Estimating a Bank's