The Spread of Deposit Insurance and the Global Rise in Bank Asset Risk Since the 1970s

58 Pages Posted: 26 Dec 2018 Last revised: 9 Jan 2019

See all articles by Charles W. Calomiris

Charles W. Calomiris

Columbia University - Columbia Business School; National Bureau of Economic Research (NBER)

Sophia Chen

International Monetary Fund (IMF) - Research Department

Multiple version iconThere are 2 versions of this paper

Date Written: December 6, 2018

Abstract

We construct a new measure of deposit insurance generosity for many countries, empirically model the exogenous international influences on the adoption and generosity of deposit insurance and show the causal chain from the expansion of deposit insurance generosity to increased overall lending and mortgage loans, increased banking system leverage, and more severe and frequent banking crises. Greater deposit insurance generosity produces greater lending and a greater proportion of mortgage loans, and higher banking system leverage. Instrumented increases in overall lending and mortgage loans also produce greater likelihood, duration, and severity of banking crises.

Keywords: deposit insurance, mortgage lending, banking crises, moral hazard

JEL Classification: G01, G18, G21, G28, F55, F65, E32

Suggested Citation

Calomiris, Charles W. and Chen, Sophia, The Spread of Deposit Insurance and the Global Rise in Bank Asset Risk Since the 1970s (December 6, 2018). Available at SSRN: https://ssrn.com/abstract=3297294 or http://dx.doi.org/10.2139/ssrn.3297294

Charles W. Calomiris (Contact Author)

Columbia University - Columbia Business School ( email )

3022 Broadway
601 Uris, Dept. of Finance & Economics
New York, NY 10027
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212-854-8748 (Phone)
212-316-9219 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Sophia Chen

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States

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