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Deposit Insurance and Lender-of-Last-Resort Functions

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Author Info

  • Sleet, Christopher
  • Smith, Bruce D

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 Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 32 (2000)
Issue (Month): 3 (August)
Pages: 518-75

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Handle: RePEc:mcb:jmoncb:v:32:y:2000:i:3:p:518-75

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879

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Cited by:
  1. Ilhyock Shim & Narayana Kocherlakota, 2005. "Forbearance and prompt corrective action," BIS Working Papers 177, Bank for International Settlements.
  2. Antoine Martin, 2008. "Reconciling Bagehot with the Fed's response to September 11," Staff Reports 217, Federal Reserve Bank of New York.
  3. Charles M. Kahn & João A.C. Santos, 2001. "Allocating bank regulatory powers: lender of last resort, deposit insurance, and supervision," Proceedings 717, Federal Reserve Bank of Chicago.
  4. Spiegel, Mark M., 2005. "Solvency runs, sunspot runs, and international bailouts," Journal of International Economics, Elsevier, vol. 65(1), pages 203-219, January.
  5. 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.).
  6. 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.
  7. 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.
  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. Claeys, Sophie & Schoors, Koen, 2007. "Bank supervision Russian style: Evidence of conflicts between micro- and macroprudential concerns," Working Paper Series 205, Sveriges Riksbank (Central Bank of Sweden).
  10. Antoine Martin, 2001. "Liquidity provision vs. deposit insurance : preventing bank panics without moral hazard?," Research Working Paper RWP 01-05, Federal Reserve Bank of Kansas City.
  11. Klüh, Ulrich, 2005. "Safety Net Design and Systemic Risk: New Empirical Evidence," Discussion Papers in Economics 662, University of Munich, Department of Economics.
  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. 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.

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