EconStor >
Institut für Weltwirtschaft (IfW), Kiel >
Economics: The Open-Access, Open-Assessment E-Journal - Journal Articles >

Please use this identifier to cite or link to this item:

Full metadata record

DC FieldValueLanguage
dc.contributor.authorSchich, Sebastian T.en_US
dc.identifier.citationEconomics: The Open-Access, Open-Assessment E-Journal 3 2009-20 1-23 doi:10.5018/economics-ejournal.ja.2009-20-
dc.description.abstractGovernment provision of a financial safety net for financial institutions has been a key element of the policy response to the current crisis, with governments extending existing guarantees and introducing new ones. These measures have been helpful in avoiding a further accelerated loss of confidence. But they are not costless. Like any guarantee, deposit insurance gives rise to moral hazard, especially if the coverage is unlimited. In the midst of a crisis, the immediate task is to restore confidence, and guarantees can be helpful in that respect. Nonetheless, to keep market discipline operational, it is important to specify when the extra insurance will end, and this timeline needs to be credible. To be able to establish such a timeline the root causes of the lack of confidence - that is the effects of troubled assets on financial firms' health - need to be addressed effectively. On a more fundamental level, once a government has ventured down the road of guarantee expansion, there may be a general perception that a government guarantee will always be available during crisis situations. As a consequence, other elements of the financial safety net may need to be strengthened, including the prudential and supervisory framework.en_US
dc.publisherKiel Institute for the World Economy (IfW) Kielen_US
dc.subject.keywordPolicy responses to financial crisisen_US
dc.subject.keywordsafety neten_US
dc.subject.keyworddeposit insuranceen_US
dc.subject.keywordmoral hazarden_US
dc.subject.stwÖffentliche Kreditvergabeen_US
dc.subject.stwMoral Hazarden_US
dc.titleChallenges Associated with the Expansion of Deposit Insurance Coverage during Fall 2008en_US
Appears in Collections:Economics: The Open-Access, Open-Assessment E-Journal - Journal Articles

Files in This Item:
File Description SizeFormat
economics_2009-20.pdf589.75 kBAdobe PDF
No. of Downloads: Counter Stats
Show simple item record
Download bibliographical data as: BibTeX

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.