Journal Article

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.

Keywords: Deposit insurance; International finance; Loans, Foreign; Bank loans;

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    Spiegel, Mark M.

Bibliographic Information

Provider: Federal Reserve Bank of San Francisco

Part of Series: Economic Review

Publication Date: 1996

Pages: 3-15

Order Number: 2