Arbeitspapier
The Dynamics of Deposit Insurance and the Consumption Trap
We investigate a banking system subject to repeated macroeconomic shocks and show that without deposit rate control, the banking system collapses with certainty. Any initial level of reserves will delay the collapse but not avoid it. Even without a banking collapse, the economy still converges to a consumption trap with positive probability. Savings are maximal in the consumption trap, but are used entirely to pay back obligations of banks. No long-term investments can be financed and GDP is minimal. We discuss stronger intervention rules that avoid both a collapse and the consumption trap, confirming that capital requirements are an early indicator signaling when intervention may become necessary. Our analysis provides an explanation why economies which experience a banking crisis may endure long-lasting economic downturns.
- Sprache
-
Englisch
- Erschienen in
-
Series: CESifo Working Paper ; No. 509
- Klassifikation
-
Wirtschaft
- Thema
-
Financial intermediation
macroeconomic risks
banking crises
deposit insurance
banking regulation
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Gersbach, Hans
Wenzelburger, Jan
- Ereignis
-
Veröffentlichung
- (wer)
-
Center for Economic Studies and ifo Institute (CESifo)
- (wo)
-
Munich
- (wann)
-
2001
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:44 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Gersbach, Hans
- Wenzelburger, Jan
- Center for Economic Studies and ifo Institute (CESifo)
Entstanden
- 2001
Ähnliche Objekte (12)
Deposit Insurance in General Equilibrium
The Correct Economic Interpretation of Rational Expectations : Reply
Inflation Rates and Money Growth During High-Inflations
Contingent contracts in banking: Insurance or risk magnification?
Learning of General Equilibrium Effects and the Unemployment Trap
Bargaining power and equilibrium consumption
Campaigns, political mobility, and communication
Democratizing tech giants! A roadmap
Campaigns, Political Mobility, and Communication
The Correct Economic Interpretation of Rational Expectations
Competition of Politicians for Incentive Contracts and Elections
Financial Intermediation and the Creation of Macroeconomic Risks
Deposit Insurance in General Equilibrium
The Correct Economic Interpretation of Rational Expectations : Reply
Inflation Rates and Money Growth During High-Inflations
Contingent contracts in banking: Insurance or risk magnification?
Learning of General Equilibrium Effects and the Unemployment Trap
Bargaining power and equilibrium consumption
Campaigns, political mobility, and communication
Democratizing tech giants! A roadmap
Campaigns, Political Mobility, and Communication
The Correct Economic Interpretation of Rational Expectations
Competition of Politicians for Incentive Contracts and Elections
Financial Intermediation and the Creation of Macroeconomic Risks
Deposit Insurance in General Equilibrium
The Correct Economic Interpretation of Rational Expectations : Reply
Inflation Rates and Money Growth During High-Inflations
Contingent contracts in banking: Insurance or risk magnification?
Learning of General Equilibrium Effects and the Unemployment Trap
Bargaining power and equilibrium consumption
Campaigns, political mobility, and communication
Democratizing tech giants! A roadmap
Campaigns, Political Mobility, and Communication
The Correct Economic Interpretation of Rational Expectations
Competition of Politicians for Incentive Contracts and Elections