Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments December 31, 2020 erstellt
Beschreibung:
This paper studies the impact on welfare of changes in coverage levels within deposit insuranceschemes. The paper builds on previous literature by adding the possibility of bailouts for too-big-to-fail banks and incorporating a time lag between deposit payout and recoveries. Banks are alsoallowed to adjust deposit rates, and I include the effect this has on welfare. I show how to linktheoretical results in this expanded model to observable variables, and I apply it to Colombia’s2017 increase in its coverage level. I estimate all the model’s parameters from data and calculatethe impact on welfare of this increase in coverage. Benefits outweigh costs, although the net effectis modest in size and sensitive to some of the parameters. Key variables are size, the probabilityof default and the impact the change in the coverage level has on the amount of insured deposits.Bailouts have mixed effects but overall raise the costs of increasing coverage levels. So does including a time lag between payout and recoveries. Allowing banks to adjust deposit rates also leads to larger costs because of higher deposit rates