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Determinants of Deposit-Insurance Adoption and Design

Asli Demirgüç-Kunt

World Bank - Financial and Private Sector Development; World Bank

Edward J. Kane

Boston College - Department of Finance; National Bureau of Economic Research (NBER)

Luc Laeven

International Monetary Fund (IMF); Centre for Economic Policy Research (CEPR)

January 2007

NBER Working Paper No. w12862

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.

Number of Pages in PDF File: 57

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Date posted: January 24, 2007  

Suggested Citation

Demirgüç-Kunt, Asli and Kane, Edward J. and Laeven, Luc, Determinants of Deposit-Insurance Adoption and Design (January 2007). NBER Working Paper No. w12862. Available at SSRN: http://ssrn.com/abstract=959136

Contact Information

Asli Demirgüç-Kunt
World Bank - Financial and Private Sector Development ( email )
United States
202-473-7479 (Phone)
202-522-1155 (Fax)
HOME PAGE: http://econ.worldbank.org/staff/ademirguckunt/
World Bank ( email )
1818 H Street, NW
Washington, DC 20433
United States
Edward J. Kane (Contact Author)
Boston College - Department of Finance ( email )
Fulton Hall
Chestnut Hill, MA 02467
United States
520-299-5066 (Phone)
617-552-0431 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Luc A. Laeven
International Monetary Fund (IMF) ( email )
700 19th Street, N.W.
Washington, DC 20431
United States
202-6239020 (Phone)
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
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References:  52
Citations:  24

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