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Deposit Insurance Around the Globe: Where Does it Work?

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  • Edward J. Kane
  • Asli Demirguc-Kunt

Abstract

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.

Suggested Citation

  • Edward J. Kane & Asli Demirguc-Kunt, 2001. "Deposit Insurance Around the Globe: Where Does it Work?," NBER Working Papers 8493, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:8493
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    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • F3 - International Economics - - International Finance

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