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Moral hazard in a voluntary deposit insurance system: Revisited

Author

Listed:
  • Camacho-Gutiérrez, Pablo
  • González-Cantú, Vanessa M.

Abstract

This paper extends Wheelock and Kumbhakar’s (1995) test for moral hazard in the Kansas deposit insurance system (1910-1920). This paper tests and finds evidence of omitted bank-specific effects. Estimates in Wheelock and Kumbhakar (1995), as a result, are biased. This paper introduces unobserved individual heterogeneity to the test for moral hazard, corrects their estimates, and finds more evidence of moral hazard in the Kansas deposit insurance system.

Suggested Citation

  • Camacho-Gutiérrez, Pablo & González-Cantú, Vanessa M., 2007. "Moral hazard in a voluntary deposit insurance system: Revisited," MPRA Paper 3909, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:3909
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    File URL: https://mpra.ub.uni-muenchen.de/3909/1/MPRA_paper_3909.pdf
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    References listed on IDEAS

    as
    1. Wheelock, David C & Wilson, Paul W, 1995. "Explaining Bank Failures: Deposit Insurance, Regulation, and Efficiency," The Review of Economics and Statistics, MIT Press, vol. 77(4), pages 689-700, November.
    2. Wheelock, David C & Kumbhakar, Subal C, 1995. "Which Banks Choose Deposit Insurance? Evidence of Adverse Selection and Moral Hazard in a Voluntary Insurance System," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(1), pages 186-201, February.
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    More about this item

    Keywords

    Deposit insurance; moral hazard test; panel data; random and fixed effects;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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