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Determinants of Deposit-Insurance Adoption and Design

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

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.

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

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Date of creation: Jan 2007
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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
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