THE TRAVELS OF A BANK DEPOSIT IN TURBULENT TIMES: THE IMPORTANCE OF DEPOSIT INSURANCE DESIGN FOR CROSS-BORDER DEPOSITS |
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| Authors: | Shusen Qi Stefanie Kleimeier Harald Sander |
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| Institution: | 1. School of Management, Xiamen University, 361000 Xiamen, Fujian, China;2. Department of Finance, Maastricht University, 6211 LM Maastricht, The Netherlands;3. Faculty of Economics and Business Administration, Technische Hochschule Köln, Maastricht School of Management, 50678 Köln, Germany |
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| Abstract: | 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) |
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