The effect of raising deposit insurance coverage in times of financial crisis – Evidence from Croatian microdata
Typically, depositors in transition countries react very sensitively to the safety of deposits. Faced with rising deposit outflows in October 2008, many transition countries were forced to extend the limits of deposit insurance coverage. Has this calmed private agents? Or has it caused more uncertainty? We analyze these questions by employing household survey data for Croatia from exactly the time deposit insurance was extended. First, we provide evidence how the financial crisis has affected trust in banks and trust in the local currency. Then, we show that the increase in deposit insurance coverage had an immediate and positive impact on how people perceived the safety of deposits and the credibility of the local currency. Therefore, our results suggest that this policy measure helped to prevent a more serious and dangerous meltdown of deposits and a further shift towards foreign currency denominated assets. However, despite this effect the perceived safety of deposits remained lower than it was before the financial crisis. We also consider this finding to be of relevance for other countries of Central, Eastern and Southeastern Europe.
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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 35 (2011)
Issue (Month): 4 ()
|Contact details of provider:|| Postal: Landshuter Str. 4, 93047 Regensburg|
Phone: +49-(0)941-943 54 10
Fax: +49-(0)941-943 54 27
Web page: http://www.elsevier.com/locate/inca/621171
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:eee:ecosys:v:35:y:2011:i:4:p:496-511. 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: (Zhang, Lei)
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.