International Monetary Fund
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Washington, DC 20431
Institutional Affiliation: International Monetary Fund
Information about this author at RePEc
NBER Working Papers and Publications
|August 2018||The Spread of Deposit Insurance and the Global Rise in Bank Asset Risk since the 1970s|
with Charles W. Calomiris: w24936
We construct a new measure of the changing generosity of deposit insurance for many countries, empirically model the international influences on the adoption and generosity of deposit insurance, and show that the expansion of deposit insurance generosity increased asset risk in banking systems. We consider three asset risk measures: higher loans-to-assets, a higher proportion of lending to households, and a higher proportion of mortgage lending. None of the observed increases in these indicators is offset by declines in banking system leverage. We show that increased asset risk explains at least part of the positive association between deposit insurance and the likelihood and severity of systemic banking crises.