Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/271658 
Year of Publication: 
2023
Series/Report no.: 
DIW Discussion Papers No. 1873
Version Description: 
April 18, 2023 (revised version)
Publisher: 
Deutsches Institut für Wirtschaftsforschung (DIW), Berlin
Abstract: 
Recent proposals for a still missing European deposit insurance scheme (EDIS) argue in favor of a reinsurance framework. In this paper, we use a regime-switching open-economy DSGE model with bank default to assess the relative efficiency of such a scheme. We find that reinsurance by EDIS is more effective in stabilizing real activity, credit, and welfare than a national fiscal backstop. We demonstrate that risk-weighted contributions to EDIS are welfare-beneficial for depositors and discuss trade-offs policymakers face during the implementation of EDIS. We also find that macroprudential regulation and EDIS can complement each other and that EDIS can prevent bank runs under certain conditions.
Subjects: 
Banking Union
Deposit Insurance
Risk-Sharing
JEL: 
E61
F42
F45
G22
G28
Document Type: 
Working Paper

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