IDEAS home Printed from https://ideas.repec.org/a/eee/moneco/v49y2002i7p1373-1406.html
   My bibliography  Save this article

Does deposit insurance increase banking system stability? An empirical investigation

Author

Listed:
  • Demirguc-Kunt, Asli
  • Detragiache, Enrica

Abstract

Based on evidence of 61 countries in 1980-97, the authors find 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. The adverse impact of deposit insurance on bank stability tends to be stronger the more extensive is the coverage offered to depositors, and where the scheme is funded and run by the government rather than the private sector.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Demirguc-Kunt, Asli & Detragiache, Enrica, 2002. "Does deposit insurance increase banking system stability? An empirical investigation," Journal of Monetary Economics, Elsevier, vol. 49(7), pages 1373-1406, October.
    • Handle: RePEc:eee:moneco:v:49:y:2002:i:7:p:1373-1406
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0304-3932(02)00171-X
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Cull, Robert, 1998. "How deposit insurance affects financial depth : a cross-country analysis," Policy Research Working Paper Series 1875, The World Bank.
    2. Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 24(Win), pages 14-23.
    3. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
    4. Bhattacharya, Sudipto & Boot, Arnoud W A & Thakor, Anjan V, 1998. "The Economics of Bank Regulation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(4), pages 745-770, November.
    5. Amemiya, Takeshi, 1981. "Qualitative Response Models: A Survey," Journal of Economic Literature, American Economic Association, vol. 19(4), pages 1483-1536, December.
    6. Mr. Alexander Y Kyei, 1995. "Deposit Protection Arrangements: A Survey," IMF Working Papers 1995/134, International Monetary Fund.
    7. Calomiris, Charles W., 1999. "Building an incentive-compatible safety net," Journal of Banking & Finance, Elsevier, vol. 23(10), pages 1499-1519, October.
    8. Mr. Marco Rossi, 1999. "Financial Fragility and Economic Performance in Developing Economies: Do Capital Controls, Prudential Regulation and Supervision Matter?," IMF Working Papers 1999/066, International Monetary Fund.
    9. Joseph E. Stiglitz, 1972. "Some Aspects of the Pure Theory of Corporate Finance: Bankruptcies and Take-Overs," Bell Journal of Economics, The RAND Corporation, vol. 3(2), pages 458-482, Autumn.
    10. Demirguc-Kunt, Asl1 & Huizinga, Harry, 1999. "Market discipline and financial safety net design," Policy Research Working Paper Series 2183, The World Bank.
    11. Chari, V V & Jagannathan, Ravi, 1988. " Banking Panics, Information, and Rational Expectations Equilibrium," Journal of Finance, American Finance Association, vol. 43(3), pages 749-761, July.
    12. Matutes, Carmen & Vives, Xavier, 1996. "Competition for Deposits, Fragility, and Insurance," Journal of Financial Intermediation, Elsevier, vol. 5(2), pages 184-216, April.
    13. Caprio, Gerard Jr. & Klingebiel, Daniela, 1996. "Bank insolvencies : cross-country experience," Policy Research Working Paper Series 1620, The World Bank.
    14. Ms. Enrica Detragiache & Asli Demirgüç-Kunt, 1998. "Financial Liberalization and Financial Fragility," IMF Working Papers 1998/083, International Monetary Fund.
    15. Kevin C. Murdock & Thomas F. Hellmann & Joseph E. Stiglitz, 2000. "Liberalization, Moral Hazard in Banking, and Prudential Regulation: Are Capital Requirements Enough?," American Economic Review, American Economic Association, vol. 90(1), pages 147-165, March.
    16. Ms. G. G. Garcia, 1999. "Deposit Insurance: A Survey of Actual and Best Practices," IMF Working Papers 1999/054, International Monetary Fund.
    17. Talley, Samuel H. & Mas, Ignacio, 1990. "Deposit insurance in developing countries," Policy Research Working Paper Series 548, The World Bank.
    18. Ms. G. G. Garcia, 1996. "Deposit Insurance: Obtaining the Benefits and Avoiding the Pitfalls," IMF Working Papers 1996/083, International Monetary Fund.
    19. Joshua D. Angrist, 1991. "Instrumental Variables Estimation of Average Treatment Effects in Econometrics and Epidemiology," NBER Technical Working Papers 0115, National Bureau of Economic Research, Inc.
    20. Bhattacharya, Sudipto, 1982. "Aspects of Monetary and Banking Theory and Moral Hazard," Journal of Finance, American Finance Association, vol. 37(2), pages 371-384, May.
    21. Asli Demirgüç-Kunt & Enrica Detragiache, 1998. "The Determinants of Banking Crises in Developing and Developed Countries," IMF Staff Papers, Palgrave Macmillan, vol. 45(1), pages 81-109, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Anichul Khan & Hasnat Dewan, 2011. "Deposit insurance scheme and banking crises: a special focus on less-developed countries," Empirical Economics, Springer, vol. 41(1), pages 155-182, August.
    2. Hyytinen, Ari & Takalo, Tuomas, 2001. "Preventing Systemic Crises through Bank Transparency," Discussion Papers 776, The Research Institute of the Finnish Economy.
    3. Edward Kane, 2001. "Financial safety nets: reconstructing and modelling a policymaking metaphor," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 10(3), pages 237-273.
    4. 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.
    5. Pavel Trunin & M. Kamenskih, 2007. "Monitoring Financial Stability In Developing Economies (Case of Russia)," Research Paper Series, Gaidar Institute for Economic Policy, issue 111.
    6. Noy, Ilan, 2004. "Financial liberalization, prudential supervision, and the onset of banking crises," Emerging Markets Review, Elsevier, vol. 5(3), pages 341-359, September.
    7. Georges Dionne, 2003. "The Foundationsof Banks' Risk Regulation: A Review of Literature," THEMA Working Papers 2003-46, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    8. Demirguc-Kunt, Asli & Kane, Edward J. & Laeven, Luc, 2006. "Deposit insurance design and implementation : policy lessons from research and practice," Policy Research Working Paper Series 3969, The World Bank.
    9. Klüh, Ulrich, 2005. "Safety Net Design and Systemic Risk: New Empirical Evidence," Discussion Papers in Economics 662, University of Munich, Department of Economics.
    10. Reuven Glick & Michael M. Hutchison, 1999. "Banking and currency crises; how common are twins?," Proceedings, Federal Reserve Bank of San Francisco, issue Sep.
    11. Demirguc-Kunt, Asli & Detragiache, Enrica & Gupta, Poonam, 2006. "Inside the crisis: An empirical analysis of banking systems in distress," Journal of International Money and Finance, Elsevier, vol. 25(5), pages 702-718, August.
    12. Beck, Thorsten, 2008. "Bank competition and financial stability : friends or foes ?," Policy Research Working Paper Series 4656, The World Bank.
    13. repec:zbw:bofrdp:2003_025 is not listed on IDEAS
    14. Hyytinen, Ari & Takalo, Tuomas, 2001. "Preventing Systemic Crises through Bank Transparency," Discussion Papers 776, The Research Institute of the Finnish Economy.
    15. Hutchison, Michael & McDill, Kathleen, 1999. "Are All Banking Crises Alike? The Japanese Experience in International Comparison," Journal of the Japanese and International Economies, Elsevier, vol. 13(3), pages 155-180, September.
    16. Eichengreen, Barry & Arteta, Carlos, 2000. "Banking Crises in Emerging Markets: Presumptions and Evidence," Center for International and Development Economics Research, Working Paper Series qt3pk9t1h2, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
    17. Ari Hyytinen & Tuomas Takalo, 2002. "Enhancing Bank Transparency: A Re-assessment," Review of Finance, European Finance Association, vol. 6(3), pages 429-445.
    18. Asli Demirguc-Kunt & Edward J. Kane, 2002. "Deposit Insurance Around the Globe: Where Does It Work?," Journal of Economic Perspectives, American Economic Association, vol. 16(2), pages 175-195, Spring.
    19. Ralf Bebenroth & Diemo Dietrich & Uwe Vollmer, 2009. "Bank regulation and supervision in bank-dominated financial systems: a comparison between Japan and Germany," European Journal of Law and Economics, Springer, vol. 27(2), pages 177-209, April.
    20. Anichul Hoque Khan & Kazi Nazrul Islam, 2012. "Power of a Deposit Insurance Scheme¡¯s Authority and a Banking Crisis," Journal of Business Administration Research, Journal of Business Administration Research, Sciedu Press, vol. 1(2), pages 88-98, October.
    21. Cull, Robert & Senbet, Lemma W & Sorge, Marco, 2005. "Deposit Insurance and Financial Development," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(1), pages 43-82, February.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:moneco:v:49:y:2002:i:7:p:1373-1406. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505566 .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.