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Deposit insurance and lender-of-last-resort functions

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Author Info

  • Christopher Sleet
  • Bruce D. Smith

Abstract

We consider issues concerning the design of a banking system "safety net" when both a deposit insurer and a lender of last resort are present. In our model both entities have a role to play. Moreover, issues related to deposit insurance pricing are relatively unimportant in this context, whereas issues related to discount window access and pricing are not. We discuss when and why (or why not) a lender of last resort should lend liberally but charge high rates of interest. And, we raise the possibility that discount window policy may enhance or reduce the scope for multiplicity of equilibria.

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Bibliographic Info

Article provided by Federal Reserve Bank of Cleveland in its journal Proceedings.

Volume (Year): (2000)
Issue (Month): ()
Pages: 518-579

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Handle: RePEc:fip:fedcpr:y:2000:p:518-579

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Keywords: Deposit insurance ; Lenders of last resort;

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Cited by:
  1. Charles M. Kahn & João A. C. Santos, 2001. "Allocating bank regulatory powers: lender of last resort, deposit insurance and supervision," BIS Working Papers 102, Bank for International Settlements.
  2. Ralf Bebenroth & Diemo Dietrich & Uwe Vollmer, 2007. "Bank regulation and supervision in Japan and Germany: A comparison," Discussion Paper Series 211, Research Institute for Economics & Business Administration, Kobe University.
  3. Marco A Espinosa-Vega & Rafael Matta & Charles M. Kahn & Juan Sole, 2011. "Systemic Risk and Optimal Regulatory Architecture," IMF Working Papers 11/193, International Monetary Fund.
  4. Klüh, Ulrich, 2005. "Safety Net Design and Systemic Risk: New Empirical Evidence," Discussion Papers in Economics 662, University of Munich, Department of Economics.
  5. Claeys, Sophie & Lanine, Gleb & Schoors, Koen, 2005. "Bank supervision Russian style: Rules versus enforcement and tacit objectives," BOFIT Discussion Papers 10/2005, Bank of Finland, Institute for Economies in Transition.
  6. Mark M. Spiegel, 2000. "Solvency runs, sunspot runs, and international bailouts," Working Paper Series 2001-05, Federal Reserve Bank of San Francisco.
  7. Claeys, Sophie & Schoors, Koen, 2007. "Bank supervision Russian style: Evidence of conflicts between micro- and macro-prudential concerns," Journal of Comparative Economics, Elsevier, vol. 35(3), pages 630-657, September.
  8. Antoine Martin, 2002. "Reconciling Bagehot with the Fed's response to Sept. 11," Research Working Paper RWP 02-10, Federal Reserve Bank of Kansas City.
  9. Narayana R. Kocherlakota & Ilhyock Shim, 2007. "Forbearance and Prompt Corrective Action," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(5), pages 1107-1129, 08.
  10. Gianni De Nicolo, 2000. "Size, charter value and risk in banking: an international perspective," International Finance Discussion Papers 689, Board of Governors of the Federal Reserve System (U.S.).
  11. Antoine Martin, 2006. "Liquidity provision vs. deposit insurance: preventing bank panics without moral hazard," Economic Theory, Springer, vol. 28(1), pages 197-211, 05.
  12. S. CLAEYS & G. LANINE & K. SCHOORs, 2005. "Bank Supervision Russian Style: Rules vs Enforcement and Tacit Objectives," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 05/307, Ghent University, Faculty of Economics and Business Administration.
  13. Antoine Martin, 2008. "Reconciling Bagehot with the Fed's response to September 11," Staff Reports 217, Federal Reserve Bank of New York.

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