With panel data from 1981 to 2008 covering 105 countries, this paper investigates the impact of explicit deposit insurance generosity on financial systemic risk. The deposit insurance generosity is measured by the effective deposit coverage limit to GDP per capita ratio. While preliminary results from basic regressions suggest that the correlation between deposit coverage generosity and systemic risk might be U-shaped---an appropriate increase in coverage generosity can reduce systemic risk by building public confidence in the banking system, but may increase systemic risk when policies become too generous, because of moral hazard---this is yet to be confirmed by robust and more appropriate probit analysis. This preliminary finding suggests that the tipping points of effective coverage ratio where explicit deposit insurance systems start to increase systemic risk vary by country groups, and by whether time-fixed effect is controlled for. Further research is needed for confirming the correlation between coverage generosity and systemic risk.
| Identifer | oai:union.ndltd.org:CHENGCHI/U0001508449 |
| Creators | Guo, Taiyang. |
| Publisher | Georgetown University. |
| Source Sets | National Chengchi University Libraries |
| Detected Language | English |
| Type | text |
| Rights | Copyright © nccu library on behalf of the copyright holders |
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