Abstract:
Based on the panel Data of 88 countries from year 1970 to 2012, this paper examines the impact of interest rate liberalization and the explicit deposit insurance on the probability of systemic banking crises. The results shows that, interest rate liberalization tends to increase the likelihood of systemic banking crises; though after the interest rate fully liberalized, bank moral hazard caused by the explicit deposit insurance is high and the explicit deposit insurance’s financial stability effects is not obvious, and for the entire period the explicit deposit insurance’s preventive role of systemic banking crises is limited, the explicit deposit insurance will help to reduce the likelihood of systemic banking crises during the period of interest rate liberalization. In addition, the strengthening of banking supervision, designs intend to improve market discipline and prevent moral hazard, will increase explicit deposit insurance’s financial stability effects and help to prevent systemic banking crises.
Abiad, Abdul, Enrica Detragiache, and Thierry Tressel, 2008,“A New Database of Financial Reforms”, IMF Working Paper, No.WP/08/266.
[8]
Anginer, Deniz, Asli Demirgüc,-Kunt, and Min Zhu, 2014, “How Does Deposit Insurance Affect Bank Risk? Evidence from the Recent Crisis”, Journal of Banking & Finance, 48(11):312~321.
[9]
Beck, Thorsten, Asli Demirgüc,-Kunt, and Ross Levine, 2006,“Bank Concentration, Competition, and Crises First Results”, Journal of Banking & Finance, 30(5): 1581~1603.
[10]
Cˇihák, Martin, Asl? Demirgüc,-Kunt, María Soledad Martínez Pería, and Amin Mohseni-Cheraghlou, 2012, “Bank Regulation and Supervision Around the World: A Crisis Update”, World Bank Policy Research Working Paper, No.WPS6286.
[11]
Demirgüc,-Kunt, Asli, and Enrica Detragiache, 1998,“The Determinants of Banking Crises: Evidence from Developing and Developed Countries,” IMF staff Papers, 45(1): 81~109.
[12]
Demirgüc,-Kunt, Asli, and Enrica Detragiache, 1999,“Financial Liberalization and Financial Fragility,” in Pleskovic B. and J. Stiglitz ed., Proceedings of the World Bank Annual Conference on Development Economics.
[13]
Demirgüc,-Kunt, Asli, and Enrica Detragiache, 2002,“Does Deposit Insurance Increase Banking System Stability? An Empirical Investigation”, Journal of Monetary Economics, 49(7):1373~406.
[14]
Demirgüc,-Kunt, Asli, and H. Huizinga, 2004,“Market Discipline and Deposit Insurance”, Journal of Monetary Economics, 51(2): 375~399.
[15]
Demirgüc,-Kunt, Asli, Baybars Karacaovali, and Luc Laeven, 2005, “Deposit Insurance around the World: A Comprehensive Database”, World Bank Policy Research Working Paper 3628.
[16]
Demirgüc,-Kunt, Asli, Edward J. Kane, and Luc Laeven, 2008,“Determinants of Deposit-insurance Adoption and Design”, Journal of Financial Intermediation, 17(3): 407~438.
[17]
Diamond, D. and P. Dybvig, 1983,“Bank Runs, Deposit Insurance, and Liquidity,” Journal of Political Economy, 91(3): 401~419.
[18]
Freixas, X., and Rochet, J. C., 1997, “Microeconomics of Banking”, MIT Press, Cambridge, MA.
[19]
Hellman, Thomas,K. Murdock, and Stiglitz J. E., 2000, “Liberalization, Moral Hazard in Banking and Prudential Regulation: Are Capital Controls Enough?” American Economic Review, 90(1):147~165.
[20]
Ioannidou, V. P., and M. F. Penas, 2010, “Deposit Insurance and Bank Risk-taking: Evidence from Internal Loan Ratings”, Journal of Financial Intermediation, 19 (1): 95~115.
[21]
Kaminsky, Graciela and Reinhart, Carmen, 1999,“The Twin Crises: The Causes of Banking and Balance-Of-Payments Problems,” American Economic Review, 89(3): 473~500.
[22]
Keeley, Michael C., 1990, “Deposit Insurance, Risk and Market Power in Banking”, American Economic Review, 80(5): 1183~1200.
[23]
Laeven, Luc, and Fabián Valencia, 2013,“Systemic Banking Crises Database”, IMF Economic Review, 61(2): 225~270.
[24]
Nier, Erlend, and Ursel Baumann, 2006, “Market Discipline, Disclosure and Moral Hazard in Banking”, Journal of Financial Intermediation, 15(3): 332~361.
[25]
Noy, I., 2004,“Financial Liberalization, Prudential Supervision, and the Onset of Banking Crises”, Emerging Markets Review, 5(3): 341~59.
[26]
Peria, M.S., and Schmukler, S., 2001, “Do Depositors Punish Banks for Bad Behavior? Market Discipline, Deposit Insurance and Banking Crises”, Journal of Finance, 56(3): 1029~1051.
[27]
Stiglitz, J.E., 1994, “The Role of State in Financial Markets”, in Bruno, M. and Pleskovic, B. (eds), Proceedings of the World Bank Annual Conference on Development Economics, Washington DC, World Bank.
[28]
Yair, Mundlak, 1978, “On the Pooling of Time Series and Cross Section Data”, Econometrica, 46(1): 69~85.
