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Deposit Insurance Without Commitment: Wall St. Versus Main St

Author

Listed:
  • Russell Cooper
  • Hubert Kempf

Abstract

This paper studies the provision of deposit insurance without commitment in an economy with heterogenous households. When households are identical, deposit insurance will be provided ex post to reap insurance gains. But the ex post provision of deposit insurance redistributes consumption when households differ in their claims on the banking system as well as in their tax obligations to finance the deposit insurance. Deposit insurance will not be provided ex post if it requires a (socially) undesirable redistribution of consumption which outweighs insurance gains.

Suggested Citation

  • Russell Cooper & Hubert Kempf, 2011. "Deposit Insurance Without Commitment: Wall St. Versus Main St," NBER Working Papers 16752, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:16752
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    File URL: http://www.nber.org/papers/w16752.pdf
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    Cited by:

    1. Russell Cooper & Hubert Kempf, 2016. "Deposit insurance and bank liquidation without commitment: Can we sleep well?," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 61(2), pages 365-392, February.
    2. Todd Keister, 2016. "Bailouts and Financial Fragility," Review of Economic Studies, Oxford University Press, vol. 83(2), pages 704-736.
    3. Claudia Lambert, 2015. "Die Debatte um die Einlagensicherung: Hintergr√ľnde und Perspektiven," DIW Roundup: Politik im Fokus 56, DIW Berlin, German Institute for Economic Research.

    More about this item

    JEL classification:

    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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