Financial safety nets: reconstructing and modelling a policymaking metaphor

Edward Kane

The Journal of International Trade & Economic Development, 2001, vol. 10, issue 3, 237-273

Abstract: This paper explains that financial safety nets exist because of difficulties in enforcing contracts and shows that elements of deposit-insurance schemes differ substantially across countries. It shows that differences in the design of financial safety nets correlate significantly with differences in the informational and contracting environments of individual countries and that a country's GDP per capita is correlated with proxies for a country's level of: (1) informational transparency, (2) contract enforcement and deterrent rights, and (3) accountability for safety net officials. The analysis portrays deposit insurance as a part of a country's larger safety net and contracting environment. This means that there is no universal method for preventing and resolving banking problems and that the structure of a country's safety net should evolve over time with changes in private and government regulators' capacity for valuing financial institutions, disciplining risk taking and resolving insolvency promptly, and for being held accountable for how well they perform these tasks.

Keywords: Safety Nets; Deposit Insurance; Financial Regulation; Financial Contracting Theory; Risk-SHIFTING (search for similar items in EconPapers)
Date: 2001
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/09638190110061302 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Financial Safety Nets: Reconstructing and Modeling a Policymaking Metaphor (2001)
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:taf:jitecd:v:10:y:2001:i:3:p:237-273

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RJTE20

DOI: 10.1080/09638190110061302

Access Statistics for this article

The Journal of International Trade & Economic Development is currently edited by Pasquale Sgro, David E.A. Giles and Charles van Marrewijk

More articles in The Journal of International Trade & Economic Development from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().