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The Macroeconomic Effects of a European Deposit (Re-) Insurance Scheme

Marius Clemens (), Stefan Gebauer and Tobias König

No 1873, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

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.

Keywords: Banking Union; Deposit Insurance; Risk-Sharing (search for similar items in EconPapers)
JEL-codes: E61 F42 F45 G22 G28 (search for similar items in EconPapers)
Pages: 67 p.
Date: 2020
New Economics Papers: this item is included in nep-dge, nep-eec, nep-ias, nep-mac and nep-opm
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