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Deposit Insurance Around the Globe: Where Does it Work?

  • Edward J. Kane
  • Asli Demirguc-Kunt

Explicit deposit insurance has been spreading rapidly in recent years, even to countries with low levels of financial and institutional development. Economic theory indicates that deposit-insurance design features interact--for good or ill--with country-specific elements of the financial and governmental contracting environment. This paper documents the extent of cross-country differences in deposit-insurance design and reviews empirical evidence on how particular design features affect private market discipline, banking stability, financial development, and the effectiveness of crisis resolution. This evidence challenges the wisdom of encouraging countries to adopt explicit deposit insurance without first stopping to assess and remedy weaknesses in their informational and supervisory environments.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8493.

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Date of creation: Sep 2001
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Publication status: published as 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.
Handle: RePEc:nbr:nberwo:8493
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