A Hierarchical Agency Model of Deposit Insurance

Jonathan Carroll and Shino Takayama ()

No 410, Discussion Papers Series from University of Queensland, School of Economics

Abstract: This paper develops a hierarchical agency model of deposit insurance. The main purpose is to undertake a game theoretic analysis of the consequences of deposit insurance schemes and their effects on monitoring incentives for banks. Using this simple framework, we analyze both risk- independent and risk-dependent premium schemes along with reserve requirement constraints. The results provide policymakers with not only a better understanding of the effects of deposit insurance on welfare and the problem of moral hazard, but also the policy implications implied in the design of de- posit insurance schemes. Our finding is consistent with the empirical research on depositor discipline.

Date: 2010
New Economics Papers: this item is included in nep-ban, nep-cta and nep-ias
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https://economics.uq.edu.au/files/44752/410.pdf (application/pdf)

Related works:
Journal Article: A hierarchical agency model of deposit insurance (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:qld:uq2004:410

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