Advanced Search
MyIDEAS: Login to save this paper or follow this series

Determinants of Deposit-Insurance Adoption and Design

Contents:

Author Info

  • Asli Demirguc-Kunt
  • Edward J. Kane
  • Luc Laeven

Abstract

This paper identifies factors that influence decisions about a country's financial safety net, using a comprehensive dataset covering 180 countries during the 1960-2003 period. Our analysis focuses on how private interest-group pressures, outside influences, and political-institutional factors affect deposit-insurance adoption and design. Controlling for macroeconomic shocks, quality of bank regulations, and institutional development, we find that both private and public interests, as well as outside influences to emulate developed-country regulatory schemes, can explain the timing of adoption decisions and the rigor of loss-control arrangements. Controlling for other factors, political systems that facilitate intersectoral power sharing dispose a country toward design features that accommodate risk-shifting by banks.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.nber.org/papers/w12862.pdf
Download Restriction: no

Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12862.

as in new window
Length:
Date of creation: Jan 2007
Date of revision:
Publication status: published as Demirgüç-Kunt, Asli & Kane, Edward J. & Laeven, Luc, 2008. "Determinants of deposit-insurance adoption and design," Journal of Financial Intermediation, Elsevier, vol. 17(3), pages 407-438, July.
Handle: RePEc:nbr:nberwo:12862

Note: CF
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Barth, James R. & Caprio, Gerard Jr. & Levine, Ross, 2004. "Bank regulation and supervision: what works best?," Journal of Financial Intermediation, Elsevier, Elsevier, vol. 13(2), pages 205-248, April.
  2. Marco Pagano & Paolo Volpin, 2001. "The Political Economy of Finance," CSEF Working Papers, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy 76, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  3. Charles W. Calomiris & Eugene N. White, 1994. "The Origins of Federal Deposit Insurance," NBER Chapters, in: The Regulated Economy: A Historical Approach to Political Economy, pages 145-188 National Bureau of Economic Research, Inc.
  4. Cooperstein Richard L. & Pennacchi George G. & Redburn F. Stevens, 1995. "The Aggregate Cost of Deposit Insurance: A Multiperiod Analysis," Journal of Financial Intermediation, Elsevier, Elsevier, vol. 4(3), pages 242-271, July.
  5. Bhattacharya, S. & Boot, A.W.A. & Thakor, A.V., 1995. "The Economics of Bank Regulation," Papers, Centro de Estudios Monetarios Y Financieros- 9516, Centro de Estudios Monetarios Y Financieros-.
  6. Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert Vishny, . "The Quality of Government," Working Paper 19452, Harvard University OpenScholar.
  7. Armen Hovakimian & Edward J. Kane & Luc Laeven, 2002. "How Country and Safety-Net Characteristics Affect Bank Risk-Shifting," NBER Working Papers 9322, National Bureau of Economic Research, Inc.
  8. Edward J. Kane & Berry K. Wilson, 1998. "A contracting-theory intepretation of the origins of Federal deposit insurance," Proceedings, Federal Reserve Bank of Cleveland, Federal Reserve Bank of Cleveland, issue Aug, pages 573-595.
  9. Honohan,Patrick & Laeven,Luc (ed.), 2005. "Systemic Financial Crises," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521851855.
  10. Aaron Tornell & Frank Westermann & Lorenza Martínez, 2004. "The Positive Link Between Financial Liberalization, Growth, and Crises," CESifo Working Paper Series 1164, CESifo Group Munich.
  11. Gerard Caprio & Patrick Honohan, 2008. "Banking Crises," Center for Development Economics, Department of Economics, Williams College 2008-09, Department of Economics, Williams College.
  12. Calomiris, Charles W., 1999. "Building an incentive-compatible safety net," Journal of Banking & Finance, Elsevier, Elsevier, vol. 23(10), pages 1499-1519, October.
  13. Barth,James R. & Caprio,Gerard & Levine,Ross, 2008. "Rethinking Bank Regulation," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521709309.
  14. Laeven, Luc, 2004. "The political economy of deposit insurance," Policy Research Working Paper Series 3247, The World Bank.
  15. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei, 2001. "Government Ownership of Banks," Working Paper Series, Harvard University, John F. Kennedy School of Government rwp01-016, Harvard University, John F. Kennedy School of Government.
  16. Randall S. Kroszner & Thomas Stratmann, 1998. "Interest Group Competition and the Organization of Congress: Theory and Evidence from Financial Services' Political Action Committees," CRSP working papers, Center for Research in Security Prices, Graduate School of Business, University of Chicago 349, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  17. Eugene N. White, 1997. "The Legacy of Deposit Insurance: The Growth, Spread, and Cost of Insuring Financial Intermediaries," NBER Working Papers 6063, National Bureau of Economic Research, Inc.
  18. Chari, V V & Jagannathan, Ravi, 1988. " Banking Panics, Information, and Rational Expectations Equilibrium," Journal of Finance, American Finance Association, American Finance Association, vol. 43(3), pages 749-61, July.
  19. Demirguc-Kunt, Asli & Detragiache, Enrica, 2002. "Does deposit insurance increase banking system stability? An empirical investigation," Journal of Monetary Economics, Elsevier, Elsevier, vol. 49(7), pages 1373-1406, October.
  20. Persson, Torsten & Tabellini , Guido, 1997. "Political Economics and Macroeconomic Policy," Seminar Papers, Stockholm University, Institute for International Economic Studies 630, Stockholm University, Institute for International Economic Studies.
  21. Barro, Robert J & Gordon, David B, 1983. "A Positive Theory of Monetary Policy in a Natural Rate Model," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 91(4), pages 589-610, August.
  22. George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
  23. White, Eugene, 1995. "Deposit insurance," Policy Research Working Paper Series 1541, The World Bank.
  24. Demirguc-Kunt, Asli & Huizinga, Harry, 2004. "Market discipline and deposit insurance," Journal of Monetary Economics, Elsevier, Elsevier, vol. 51(2), pages 375-399, March.
  25. Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, Federal Reserve Bank of Minneapolis, issue Win, pages 14-23.
  26. G. G. Garcia, 2000. "Deposit Insurance," IMF Occasional Papers 197, International Monetary Fund.
  27. G. G. Garcia, 1999. "Deposit Insurance," IMF Working Papers 99/54, International Monetary Fund.
  28. Beck, Thorsten & Clarke, George & Groff, Alberto & Keefer, Philip & Walsh, Patrick, 2000. "New tools and new tests in comparative political economy - the database of political institutions," Policy Research Working Paper Series 2283, The World Bank.
  29. Talley, Samuel H. & Mas, Ignacio, 1990. "Deposit insurance in developing countries," Policy Research Working Paper Series 548, The World Bank.
  30. Cull, Robert & Senbet, Lemma W. & Sorge, Marco, 2001. "Deposit insurance and financial development," Policy Research Working Paper Series 2682, The World Bank.
  31. Ronald Giammarino & Eduardo Schwartz & Josef Zechner, 1989. "Market Valuation of Bank Assets and Deposit Insurance in Canada," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 22(1), pages 109-27, February.
  32. Marco Pagano & Paolo Volpin, 1999. "The Political Economy of Corporate Governance," CSEF Working Papers, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy 29, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 01 Jul 2005.
  33. Barth, James R. & Caprio Jr, Gerard & Levine, Ross, 2001. "The regulation and supervision of banks around the world - a new database," Policy Research Working Paper Series 2588, The World Bank.
  34. David C. Wheelock & Paul W. Wilson, 1993. "Explaining bank failures: deposit insurance, regulation, and efficiency," Working Papers, Federal Reserve Bank of St. Louis 1993-002, Federal Reserve Bank of St. Louis.
  35. V.V. Chari & Ravi Jagannathan, 1984. "Banking Panics," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 618, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  36. North, D.C., 1990. "A Transaction Cost Theory of Politics," Papers, Washington St. Louis - School of Business and Political Economy 144, Washington St. Louis - School of Business and Political Economy.
  37. Randall S. Kroszner, 1998. "On the political economy of banking and financial regulatory reform in emerging markets," Proceedings, Federal Reserve Bank of Chicago 605, Federal Reserve Bank of Chicago.
  38. Kane, Edward J., 1995. "Three paradigms for the role of capitalization requirements in insured financial institutions," Journal of Banking & Finance, Elsevier, Elsevier, vol. 19(3-4), pages 431-459, June.
  39. Honohan, Patrick & Klingebiel, Daniela, 2003. "The fiscal cost implications of an accommodating approach to banking crises," Journal of Banking & Finance, Elsevier, Elsevier, vol. 27(8), pages 1539-1560, August.
  40. Randall S. Kroszner & Philip E. Strahan, 1999. "What Drives Deregulation? Economics And Politics Of The Relaxation Of Bank Branching Restrictions," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 114(4), pages 1437-1467, November.
  41. Randall S. Kroszner & Philip E. Strahan, 2001. "Obstacles to Optimal Policy: The Interplay of Politics and Economics in Shaping Bank Supervision and Regulation Reforms," NBER Chapters, in: Prudential Supervision: What Works and What Doesn't, pages 233-272 National Bureau of Economic Research, Inc.
  42. Ronn, Ehud I & Verma, Avinash K, 1986. " Pricing Risk-Adjusted Deposit Insurance: An Option-Based Model," Journal of Finance, American Finance Association, American Finance Association, vol. 41(4), pages 871-95, September.
  43. Kane, Edward J. & Klingebiel, Daniela, 2004. "Alternatives to blanket guarantees for containing a systemic crisis," Journal of Financial Stability, Elsevier, Elsevier, vol. 1(1), pages 31-63, September.
  44. Edward J. Kane & Asli Demirguc-Kunt, 2001. "Deposit Insurance Around the Globe: Where Does it Work?," NBER Working Papers 8493, National Bureau of Economic Research, Inc.
  45. Sam Peltzman, 1976. "Toward a More General Theory of Regulation," NBER Working Papers 0133, National Bureau of Economic Research, Inc.
  46. Becker, Gary S, 1983. "A Theory of Competition among Pressure Groups for Political Influence," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 98(3), pages 371-400, August.
  47. Kiefer, Nicholas M, 1988. "Economic Duration Data and Hazard Functions," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 26(2), pages 646-79, June.
  48. Krueger, Anne O, 1974. "The Political Economy of the Rent-Seeking Society," American Economic Review, American Economic Association, American Economic Association, vol. 64(3), pages 291-303, June.
  49. Chan, Yuk-Shee & Greenbaum, Stuart I & Thakor, Anjan V, 1992. " Is Fairly Priced Deposit Insurance Possible?," Journal of Finance, American Finance Association, American Finance Association, vol. 47(1), pages 227-45, March.
  50. Pennacchi, George, 2006. "Deposit insurance, bank regulation, and financial system risks," Journal of Monetary Economics, Elsevier, Elsevier, vol. 53(1), pages 1-30, January.
  51. Kane, Edward J, 1996. "De Jure Interstate Banking: Why Only Now?," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 28(2), pages 141-61, May.
  52. Pennacchi, George G, 1987. "A Reexamination of the Over- (or Under-) Pricing of Deposit Insurance," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 19(3), pages 340-60, August.
  53. Beck, T.H.L. & Clarke, G. & Groff, A. & Keefer , P. & Walsh, P., 2001. "New tools in comparative political economy: The database of political institutions," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3125517, Tilburg University.
  54. S. Rao Aiyagari, 1988. "Banking panics, information, and rational expectations equilibrium," Working Papers, Federal Reserve Bank of Minneapolis 320, Federal Reserve Bank of Minneapolis.
  55. Luc Laeven, 2002. "Bank Risk and Deposit Insurance," World Bank Economic Review, World Bank Group, World Bank Group, vol. 16(1), pages 109-137, June.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:12862. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.