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Does Deposit Insurance Increase Banking System Stability?

Author

Listed:
  • Asli Demirgüç-Kunt
  • Ms. Enrica Detragiache

Abstract

This study analyzes panel data for 61 countries during 1980–97 and concludes that explicit deposit insurance tends to be detrimental to bank stability, the more so where bank interest rates are deregulated and the institutional environment is weak. Also, the adverse impact of deposit insurance on bank stability tends to be stronger when the coverage offered to depositors is extensive, when the scheme is funded, and when it is run by the government rather than by the private sector.

Suggested Citation

  • Asli Demirgüç-Kunt & Ms. Enrica Detragiache, 2000. "Does Deposit Insurance Increase Banking System Stability?," IMF Working Papers 2000/003, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2000/003
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    More about this item

    Keywords

    WP; bank deposit; insurance scheme; insurance system; insurance dummy; G28; G21; E44; deposit insurance; design feature; design variable; deposit insurance variable; deposit insurance design; insurance design; Deposit insurance; Banking crises; Bank deposits; Moral hazard; Bank soundness; Africa; Global;
    All these keywords.

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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