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Fixed-premium deposit insurance and international credit crunches

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  • Mark M. Spiegel

Abstract

This article introduces a monopolistically competitive model of foreign lending in which both explicit and implicit fixed-premium deposit insurance increase the degree to which bank participation in relending to problem debtors falls below its globally optimal level. This provides a channel for fixed-premium deposit insurance to inhibit credit extension in bad states, resulting in an increase in the expected default percentage and an increase in the expected burden on the deposit insurance institutions.

Suggested Citation

  • Mark M. Spiegel, 1996. "Fixed-premium deposit insurance and international credit crunches," Economic Review, Federal Reserve Bank of San Francisco, pages 3-15.
    • Handle: RePEc:fip:fedfer:y:1996:p:3-15:n:2
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    References listed on IDEAS

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    Cited by:

    1. Knorr Andreas, 1999. "Staatliche Bankenaufsicht – eine effiziente Institution?," ORDO. Jahrbuch für die Ordnung von Wirtschaft und Gesellschaft, De Gruyter, vol. 50(1), pages 345-370, January.

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