Bank Runs in Emerging-Market Economies: Evidence from Turkey’s Special Finance Houses

Martha Starr () and Rasim Yilmaz
Additional contact information
Rasim Yilmaz: Dumlupinar University, Kutahya, Turkey

No 2006-08, Working Papers from American University, Department of Economics

Abstract: Recent banking crises in emerging-market countries have renewed debates about deposit insurance. Because insurance erodes banks’ incentives to manage risks prudently, some argue that its elimination would improve bank stability. Yet eliminating insurance could be destabilizing if it recreates risks of self-fulfilling runs. This paper examines dynamics of depositor behavior during a set of runs on Turkey’s Special Finance Houses, an uninsured sub-sector of Islamic banks. Detailed data on withdrawals are analyzed in a vector-autoregressive framework that enables us to distinguish between informational and self-fulfilling elements of runs. We find that both types of dynamics were at work during the runs, suggesting a role for deposit insurance, judiciously used, in ruling out expectational problems that fuel tendencies to run.

Keywords: bank runs; deposit insurance; Islamic banks; financial development (search for similar items in EconPapers)
JEL-codes: G21 G28 O16 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2006-05
New Economics Papers: this item is included in nep-cba, nep-cwa, nep-fin, nep-fmk and nep-ias
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://doi.org/10.17606/tgsg-p298 First version, 2006 (application/pdf)

Related works:
Journal Article: Bank Runs in Emerging‐Market Economies: Evidence from Turkey's Special Finance Houses (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:amu:wpaper:0806

Access Statistics for this paper

More papers in Working Papers from American University, Department of Economics
Bibliographic data for series maintained by Thomas Meal ().