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Conference Paper
The impact of explicit deposit insurance on market discipline
This paper examines the interaction between market discipline and explicit or implicit deposit insurance using the experiences of Bolivia during the period 1998:1 to 2003:12. The country-specific circumstances during this period allow us to investigate the effect of explicit deposit insurance on market discipline in a setup that resembles a controlled experiment. Contrary to other studies on developing countries, we find a strong link between bank fundamentals and the supply of deposits, which is consistent with the hypothesis that market discipline is at work. The results also suggest that ...