Fixed-premium deposit insurance and international credit crunches
Abstract: This article introduces a monopolistically competitive model of foreign lending in which both explicit and implicit fixed-premium deposit insurance increase the degree to which bank participation in relending to problem debtors falls below its globally optimal level. This provides a channel for fixed-premium deposit insurance to inhibit credit extension in bad states, resulting in an increase in the expected default percentage and an increase in the expected burden on the deposit insurance institutions.
File(s): File format is application/pdf http://www.frbsf.org/econrsrch/econrev/96-2/spiegel.pdf
Provider: Federal Reserve Bank of San Francisco
Part of Series: Economic Review
Publication Date: 1996
Pages: 3-15Order Number: 2