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THE TRAVELS OF A BANK DEPOSIT IN TURBULENT TIMES: THE IMPORTANCE OF DEPOSIT INSURANCE DESIGN FOR CROSS‐BORDER DEPOSITS
Author(s) -
Qi Shusen,
Kleimeier Stefanie,
Sander Harald
Publication year - 2020
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/ecin.12845
Subject(s) - deposit insurance , financial crisis , quality (philosophy) , economics , bank run , monetary economics , business , financial system , finance , macroeconomics , philosophy , epistemology
We examine the impact of the existence on an explicit deposit insurance (DI) scheme and its design features on bilateral cross‐border deposits (CBD) in a gravity model setting. We find that both the absolute quality of a country's DI and its relative quality vis‐à‐vis other countries' DI generally affect depositor behavior. However, during systemic banking crises, cross‐border depositors primarily seek countries with the best DI schemes. Similarly, during the 2008–2009 great financial crisis, the emergency actions taken by the governments, which supply and maintain these safe havens, have led to substantial relocations of CBD. (JEL F34, G18 )