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The 1985 Ohio Thrift Crisis, the FSLIC's Solvency, and Rate Contagion for Retail CDs

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  • Cooperman, Elizabeth S
  • Lee, Winson B
  • Wolfe, Glenn A
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    Abstract

    This paper uses both an ARIMA transfer-function intervention model and a panel data analysis to examine the effect of the Ohio deposit insurance crisis in 1985 on the pricing of six-month retail certificates of deposit (CDs) for federally-insured Ohio banks and savings and loans. Adjusting for pricing reactions due to changes in market rates, the authors find a significant, unanticipated rise in CD-rate premiums on the initial event week of the crisis that continued for approximately seven weeks. Consistent with a contingent insurance guarantee hypothesis, rate premiums are found to be risk based. Copyright 1992 by American Finance Association.

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    Bibliographic Info

    Article provided by American Finance Association in its journal Journal of Finance.

    Volume (Year): 47 (1992)
    Issue (Month): 3 (July)
    Pages: 919-41

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    Handle: RePEc:bla:jfinan:v:47:y:1992:i:3:p:919-41

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    Cited by:
    1. de Bandt, Olivier & Hartmann, Philipp, 2000. "Systemic Risk: A Survey," CEPR Discussion Papers 2634, C.E.P.R. Discussion Papers.
    2. Lehar, Alfred, 2005. "Measuring systemic risk: A risk management approach," Journal of Banking & Finance, Elsevier, vol. 29(10), pages 2577-2603, October.
    3. Whyte, Ann Marie, 1998. "The impact of dealer failures on primary dealers and on the market for repurchase agreements," Review of Financial Economics, Elsevier, vol. 7(1), pages 35-53.
    4. Ramon P. DeGennaro & James B. Thomson, 1994. "Anticipating bailouts: the incentive-conflict model and the collapse of the Ohio Deposit Guarantee Fund," Working Paper 9407, Federal Reserve Bank of Cleveland.
    5. Brooks, Robert, 1996. "Computing yields on enhanced CDs," Financial Services Review, Elsevier, vol. 5(1), pages 31-42.

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