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on Insurance Economics |
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Issue of 2019‒08‒12
thirty papers chosen by Soumitra K. Mallick Indian Institute of Social Welfare and Business Management |
| By: | Kundu, Debashish; Sharma, Nandini; Chadha, Sarabjit; Laokri, Samia; Awungafac, George; Jiang, Lai; Asaria, Miqdad |
| Abstract: | There are significant financial barriers to access treatment for multi drug resistant tuberculosis (MDR-TB) in India. To address these challenges, Chhattisgarh state in India has established a MDR-TB financial protection policy by creating MDR-TB benefit packages as part of the universal health insurance scheme that the state has rolled out in their effort towards attaining Universal Health Coverage for all its residents. In these schemes the state purchases health insurance against set packages of services from third party health insurance agencies on behalf of all its residents. Provider payment reform by strategic purchasing through output based payments (lump sum fee is reimbursed as per the MDR-TB benefit package rates) to the providers – both public and private health facilities empanelled under the insurance scheme was the key intervention. Aim To understand the implementation gap between policy and practice of the benefit packages with respect to equity in utilization of package claims by the poor patients in public and private sector. Methods Data from primary health insurance claims from January 2013 to December 2015, were analysed using an extension of ‘Kingdon’s multiple streams for policy implementation framework’ to explain the implementation gap between policy and practice of the MDR-TB benefit packages. Results The total number of claims for MDR-TB benefit packages increased over the study period mainly from poor patients treated in public facilities, particularly for the pre-treatment evaluation and hospital stay packages. Variations and inequities in utilizing the packages were observed between poor and non-poor beneficiaries in public and private sector. Private providers participation in the new MDR-TB financial protection mechanism through the universal health insurance scheme was observed to be much lower than might be expected given their share of healthcare provision overall in India. Conclusion Our findings suggest that there may be an implementation gap due to weak coupling between the problem and the policy streams, reflecting weak coordination between state nodal agency and the state TB department. There is a pressing need to build strong institutional capacity of the public and private sector for improving service delivery to MDR-TB patients through this new health insurance mechanism. |
| Keywords: | Multi-drug resistant tuberculosis; Health insurance; RSBY; Universal health coverage; Financial protection policy; Inequity; Kingdon's multiple streams; Implementation; Poor; India |
| JEL: | N0 |
| Date: | 2018–01–27 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:101197&r=all |
| By: | Laura Abrardi; Luca Colombo (Università Cattolica del Sacro Cuore; Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore); Piero Tedeschi |
| Abstract: | We study a competitive insurance market in which insurers have an imperfect informative advantage over policyholders. We show that the presence of insurers privately and heterogeneously informed about risk can explain the concentration levels, the persistent profitability and the pooling of risk observed in some insurance markets. Furthermore, we find that a lower market concentration may entail an increase in insurance premia |
| Keywords: | Insurance markets, Asymmetric information, Risk assessment, Market concentration. |
| JEL: | D43 D82 G22 |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:ctc:serie1:def084&r=all |
| By: | Mario Meier; Tim Obermeier |
| Abstract: | This paper studies how firms’ screening behavior and multiple applications per job affect the optimal design of unemployment policies. We provide a model of job search and firms’ recruitment process that incorporates important features of the hiring process. In our model, firms have limited information about the productivity of each applicant and make selective interview decisions among applicants, which leads to employer screening. We estimate the model using German administrative employment records and information on job search behavior, vacancies and applications. The model matches important features of the hiring process, e.g. the observed decline in search effort, job finding rates and interview rates with increased unemployment duration. We find that allowing for employer screening is quantitatively important for the optimal design of unemployment insurance. Benefits should be paid for a longer period of time and be more generous in the beginning, but more restrictive afterwards, compared to the case where we treat the hiring and interview decisions of firms as exogenous. This is because more generous benefits lead to lower search externalities among job seekers and because benefits change the composition of the unemployment pool which alleviates screening for the long-term unemployed. |
| Keywords: | Unemployment, Optimal Unemployment Insurance, Employer Screening |
| JEL: | H20 J64 J65 J71 |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2019_110&r=all |
| By: | Lau, Siew Yee; Parinduri, Rasyad; Lee, Yoong Hon |
| Abstract: | Micro- and small firms lack access to external finance and the labour market so that they are vulnerable to family hardships experienced by the owners such as deaths or sickness of family members. The literature is thin on how these firms cope with family hardships, in particular on whether owners’ access to social health insurance helps. We examine whether a social health insurance in Indonesia, Askeskin, protects owners of micro- and small firms against family hardships. We find some evidence Askeskin reduces the adverse effects of recent deaths in the family, outpatient care, and traffic accidents on net profits; Askeskin also protects the firms’ assets against owners’ outpatient care need. Social health insurance may, therefore, improve micro- and small firms’ survival, which (because most people in developing countries’ labour markets work in micro- and small firms) helps governments’ efforts to eradicate poverty. |
| Keywords: | social health insurance, Askeskin, family hardships, micro- and small firms, firm performance, Indonesia |
| JEL: | I13 I18 L25 O12 |
| Date: | 2019–07–22 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:95295&r=all |
| By: | Marco Rogna (Free University of Bolzano‐Bozen, Faculty of Economics and Management, Italy); Günter Schamel (Free University of Bolzano‐Bozen, Faculty of Economics and Management, Italy); Alex Weissensteiner (Free University of Bolzano‐Bozen, Faculty of Economics and Management, Italy) |
| Abstract: | In several areas of the world, hail is one of the most detrimental atmospheric phenomenon for agriculture, causing a significant loss of output and, consequently, of farms’ revenues. Despite being a highly stochastic and localized phenomenon, thus allowing for a sustainable insurance market to hedge against its detrimental effects, this last is often subsidised. The present paper tries to figure out if the promotion of an alternative hedging instrument, anti-hail nets, could help to increase the actuarial soundness of the hail insurance market. In the first part of the paper a simple model is presented showing that the relation between the differential profitability of anti-hail nets versus insurance and the plot specific versus the average expected damage has an inverse U-shape. This implies that incentives to anti-hail nets could cause low risk farmers to exit the insurance market more likely than high risk ones. Such finding is confirmed by the empirical investigation, further showing that higher per-hectare output values and being located in an area strongly affected by hail increase the chance of a plot to be hedged through anti-hail nets. |
| Keywords: | Actuarial soundness; Agricultural insurance markets; Anti-hail nets; Hail; Panel data |
| JEL: | D22 Q12 Q18 |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:bzn:wpaper:bemps64&r=all |
| By: | Yavuz Arslan; Ahmet Degerli; Gazi Kabaş |
| Abstract: | Many countries provide unemployment insurance (UI) to reduce individuals' income risk and to moderate fluctuations in the economy. However, to the extent that these policies are successful, they would be expected to reduce precautionary savings and hence bank deposits--households' main saving instrument. In this paper, we study this reduced incentive to save and uncover a novel distortionary mechanism through which UI policies affect the economy. In particular, we show that, when UI benefits become more generous, bank deposits fall. Since deposits are the main stable funding source for banks, this fall in deposits squeezes bank commercial lending, which in turn reduces corporate investment. |
| Keywords: | unemployment insurance, precautionary savings, bank deposits |
| JEL: | D14 G21 J65 |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:795&r=all |
| By: | He, Juan; Rejesus, Roderick M.; Zheng, Xiaoyong; Yorobe, Jose M. |
| Keywords: | Risk and Uncertainty |
| Date: | 2019–06–25 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea19:291278&r=all |
| By: | Sloggy, Matthew R.; Manning, Dale; Goemans, Christopher; Claassen, Roger L. |
| Keywords: | Resource /Energy Economics and Policy |
| Date: | 2019–06–25 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea19:291095&r=all |
| By: | Heinrich, Torsten; Sabuco, Juan; Farmer, J. Doyne |
| Abstract: | We develop an agent-based simulation of the catastrophe insurance and reinsurance industry and use it to study the problem of risk model homogeneity. The model simulates the balance sheets of insurance firms, who collect premiums from clients in return for ensuring them against intermittent, heavy-tailed risks. Firms manage their capital and pay dividends to their investors, and use either reinsurance contracts or cat bonds to hedge their tail risk. The model generates plausible time series of profits and losses and recovers stylized facts, such as the insurance cycle and the emergence of asymmetric, long tailed firm size distributions. We use the model to investigate the problem of risk model homogeneity. Under Solvency II, insurance companies are required to use only certified risk models. This has led to a situation in which only a few firms provide risk models, creating a systemic fragility to the errors in these models. We demonstrate that using too few models increases the risk of nonpayment and default while lowering profits for the industry as a whole. The presence of the reinsurance industry ameliorates the problem but does not remove it. Our results suggest that it would be valuable for regulators to incentivize model diversity. The framework we develop here provides a first step toward a simulation model of the insurance industry for testing policies and strategies for better capital management. |
| Keywords: | insurance; systemic risk; reinsurance; agent-based simulation; risk modeling |
| JEL: | C63 G22 G28 |
| Date: | 2019–07–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:95096&r=all |
| By: | Park, Sungkwol; Rejesus, Roderick M.; Zheng, Xiaoyong; Goodwin, Barry K. |
| Keywords: | Agricultural Finance |
| Date: | 2019–06–25 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea19:290741&r=all |
| By: | Hungerford, Ashley E.; Cooper, Joseph C.; Johansson, Robert C.; Worth, Thomas W. |
| Keywords: | Agricultural and Food Policy |
| Date: | 2019–06–25 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea19:290879&r=all |
| By: | DeLay, Nathan D.; Brewer, Brady E.; Featherstone, Allen M.; Boussios, David |
| Keywords: | Agricultural Finance |
| Date: | 2019–06–25 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea19:290744&r=all |
| By: | Suchato, Paloch; Mieno, Taro; Schoengold, Karina; Foster, Timothy |
| Keywords: | Resource /Energy Economics and Policy |
| Date: | 2019–06–25 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea19:291090&r=all |
| By: | Park, Sungkwol; Goodwin, Barry K.; Zheng, Xiaoyong; Rejesus, Roderick M. |
| Keywords: | Agricultural Finance |
| Date: | 2019–06–25 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea19:290742&r=all |
| By: | Simplice A. Asongu (Yaoundé/Cameroon); Nicholas M. Odhiambo (Pretoria, South Africa) |
| Abstract: | Purpose –This study investigates the role of financial access in moderating the effect of governance on insurance consumption in 42 Sub-Saharan African countries using data for the period 2004-2014. Design/methodology/approach – Two life insurance indicators are used, notably: life insurance and non-life insurance. Six governance measurements are also used, namely: political stability, “voice & accountability”, government effectiveness, regulation quality, corruption-control and the rule of law. The empirical evidence is based on the Generalised Method of Moments (GMM) and Least Squares Dummy Variable Corrected (LSDVC) estimators. Findings –Estimations from the LSDVC are not significant while the following main findings are established from the GMM. First, financial access promotes life insurance through channels of political stability, “voice & accountability”, government effectiveness, the rule of law and corruption-control. Second, financial access also stimulates non-life insurance via governance mechanisms of political stability, “voice & accountability”, government effectiveness, regulation quality, the rule of law and corruption-control. Originality/value – This research complements the sparse literature on insurance promotion in Africa by engaging the hitherto unexplored role of financial access through governance channels. |
| Keywords: | Insurance; Finance; Governance; Sub-Saharan Africa |
| JEL: | I28 I30 G20 O16 O55 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:agd:wpaper:19/044&r=all |
| By: | Simplice A. Asongu (Yaoundé/Cameroon); Nicholas M. Odhiambo (Pretoria, South Africa) |
| Abstract: | Purpose –This study investigates the role of financial access in moderating the effect of governance on insurance consumption in 42 Sub-Saharan African countries using data for the period 2004-2014. Design/methodology/approach – Two life insurance indicators are used, notably: life insurance and non-life insurance. Six governance measurements are also used, namely: political stability, “voice & accountability†, government effectiveness, regulation quality, corruption-control and the rule of law. The empirical evidence is based on the Generalised Method of Moments (GMM) and Least Squares Dummy Variable Corrected (LSDVC) estimators. Findings –Estimations from the LSDVC are not significant while the following main findings are established from the GMM. First, financial access promotes life insurance through channels of political stability, “voice & accountability†, government effectiveness, the rule of law and corruption-control. Second, financial access also stimulates non-life insurance via governance mechanisms of political stability, “voice & accountability†, government effectiveness, regulation quality, the rule of law and corruption-control. Originality/value – This research complements the sparse literature on insurance promotion in Africa by engaging the hitherto unexplored role of financial access through governance channels. |
| Keywords: | Insurance; Finance; Governance; Sub-Saharan Africa |
| JEL: | I28 I30 G20 O16 O55 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:exs:wpaper:19/044&r=all |
| By: | Ward, Patrick S.; Singh, Vartika; Gupta, Shweta; Ghosh, Ranjan |
| Keywords: | International Development |
| Date: | 2019–06–25 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea19:291023&r=all |
| By: | Simplice A. Asongu (Yaoundé/Cameroon); Joseph Nnanna (The Development Bank of Nigeria, Abuja, Nigeria); Paul N. Acha-Anyi (Walter Sisulu University, South Africa) |
| Abstract: | Purpose –This study investigates the role of ICT in modulating the effect of governance on insurance penetration in 42 sub-Saharan African countries using data for the period 2004-2014. Design/methodology/approach –Two insurance indicators are used in the analysis, namely: life insurance and non-life insurance. The three ICT modulating dynamics employed include: mobile phone penetration, internet penetration and fixed broadband subscriptions. Six governance channels are also considered, namely: political stability, “voice & accountability”, regulation quality, government effectiveness, the rule of law and corruption-control. The empirical evidence is based on generalized method of moments. Findings –The following main findings are established. First, mobile phone penetration does not significantly modulate governance channels to positively affect life insurance while it effectively complements “voice & accountability” to induce a positive net effect on non-life insurance. Second, internet penetration complements: (i) governance dynamics of political stability, government effectiveness and rule of law to induce positive net effects on life insurance: and (ii) corruption-control for an overall positive effect on non-life insurance. Third, the relevance of fixed broadband subscriptions in promoting life insurance is apparent via governance channels of regulation quality, government effectiveness and the rule of law while fixed broadband subscriptions do not induce significant overall net effects on non-life insurance though the conditional effects are overwhelmingly significant. Orginality/value – To the best our knowledge, studies on the relevance of ICT in promoting insurance consumption through governance channels are sparse, especially for a region such as sub-Saharan Africa where insurance penetration is low compared to other regions of the world. |
| Keywords: | Africa; ICT; Governance; Insurance |
| JEL: | G20 I28 I30 L96 O55 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:agd:wpaper:19/043&r=all |
| By: | Simplice A. Asongu (Yaoundé/Cameroon); Joseph Nnanna (The Development Bank of Nigeria, Abuja, Nigeria); Paul N. Acha-Anyi (Walter Sisulu University, South Africa) |
| Abstract: | Purpose –This study investigates the role of ICT in modulating the effect of governance on insurance penetration in 42 sub-Saharan African countries using data for the period 2004-2014. Design/methodology/approach –Two insurance indicators are used in the analysis, namely: life insurance and non-life insurance. The three ICT modulating dynamics employed include: mobile phone penetration, internet penetration and fixed broadband subscriptions. Six governance channels are also considered, namely: political stability, “voice & accountability†, regulation quality, government effectiveness, the rule of law and corruption-control. The empirical evidence is based on generalized method of moments. Findings –The following main findings are established. First, mobile phone penetration does not significantly modulate governance channels to positively affect life insurance while it effectively complements “voice & accountability†to induce a positive net effect on non-life insurance. Second, internet penetration complements: (i) governance dynamics of political stability, government effectiveness and rule of law to induce positive net effects on life insurance: and (ii) corruption-control for an overall positive effect on non-life insurance. Third, the relevance of fixed broadband subscriptions in promoting life insurance is apparent via governance channels of regulation quality, government effectiveness and the rule of law while fixed broadband subscriptions do not induce significant overall net effects on non-life insurance though the conditional effects are overwhelmingly significant. Orginality/value – To the best our knowledge, studies on the relevance of ICT in promoting insurance consumption through governance channels are sparse, especially for a region such as sub-Saharan Africa where insurance penetration is low compared to other regions of the world. |
| Keywords: | Africa; ICT; Governance; Insurance |
| JEL: | G20 I28 I30 L96 O55 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:exs:wpaper:19/043&r=all |
| By: | Hayen, A.P.;; Klein, T.J.;; Salm, M.; |
| Abstract: | Understanding how health care utilization responds to cost-sharing incentives is of central importance for providing high quality care and limiting the growth of costs. While there is compelling evidence that patients react to financial incentives, it is less well understood how and why specific aspects of the design of contracts shape the size of this reaction. In this paper, we focus on the question whether the framing of cost-sharing incentives has an effect on health care utilization. To study this we make use of a policy change that occurred in the Netherlands. Until 2007, patients received a a no-claim refund if they consumed little or no health care; from 2008 onward there was a deductible. This means that very similar economic incentives were first framed in terms of smaller gains and later as losses. We use claims-level data for a broad sample from the Dutch population to estimate whether the reaction to economic incentives was affected by this. Our empirical approach is to exploit within-year variation using an instrumental variables approach while controlling for differences across years. Our central finding is that patients react to incentives much more strongly when they are framed in terms of losses. Simulations based on our estimates show that the effect on yearly spending is 8.6 percent. This suggests that discussions on the optimal design of cost-sharing incentives should not only involve coinsurance rates and cost-sharing limits, but also how these are presented to patients. |
| Keywords: | patient cost-sharing; health insurance; framing; |
| JEL: | I13 D91 H51 |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:yor:hectdg:19/12&r=all |
| By: | Nugraha, Asep |
| Abstract: | This paper wants to explore more about the prospects and challenges of the development of Islamic insurance in Indonesia. Islamic insurance industry in Indonesia has very good prospects for growth, the demand for insurance products based on shariah will continue to increase. This is supported by a large population of Indonesia and also as the largest Muslim country in the world. However, this industry will also experience a very strong obstacle because of the global economic downturn, as it also conditions the people are not educated about insurance, the free market has begun to be applied, resources are less about Islamic insurance, lack of capital and other on.Therefore it needs the government's role to help to continue to grow, with regulations that support this industry. |
| Keywords: | Islamic insurance, Challenges, Global Economic. |
| JEL: | G22 |
| Date: | 2019–07–13 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:95094&r=all |
| By: | Mohamed Amine Lkabous |
| Abstract: | In this paper, we introduce the concept of \emph{Poissonian occupation times} below level $0$ of spectrally negative L\'evy processes. In this case, occupation time is accumulated only when the process is observed to be negative at arrival epochs of an independent Poisson process. Our results extend some well known continuously observed quantities involving occupation times of spectrally negative L\'evy processes. As an application, we establish a link between Poissonian occupation times and insurance risk models with Parisian implementation delays. |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1907.09990&r=all |
| By: | Sun, Yu; Liu, Gordon G.; You, Wen; Wang, Meijiao |
| Keywords: | Labor and Human Capital |
| Date: | 2019–06–25 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea19:290965&r=all |
| By: | Chen, Rui; Fang, Di; Hartarska, Valentina |
| Keywords: | Labor and Human Capital |
| Date: | 2019–06–25 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea19:290993&r=all |
| By: | Papanicolas, Irene; Woskie, Liana R.; Jha, Ashish K. |
| Abstract: | Health care spending in the United States is a major concern and is higher than in other high-income countries, but there is little evidence that efforts to reform US health care delivery have had a meaningful influence on controlling health care spending and costs. |
| JEL: | E6 |
| Date: | 2018–03–03 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:87362&r=all |
| By: | Holly Matulewicz; Katharine Bradley; Sarah Wagner |
| Abstract: | This guide is an overview of best practices in the design and administration of beneficiary surveys for use in evaluations of section 1115 Medicaid demonstrations. |
| Keywords: | evaluation design, 1115 demonstrations, 1115 waiver, section 1115, Medicaid, beneficiary surveys, longitudinal surveys, designing surveys, fielding surveys, administering surveys, survey instruments, eligibility and coverage, community engagement, premiums, account payments, non-eligibility periods, lockouts, retroactive eligibility waivers |
| URL: | http://d.repec.org/n?u=RePEc:mpr:mprres:88ef00cc37754b84a67e9f86019c617c&r=all |
| By: | Adriana D. Kugler |
| Abstract: | This paper documents recent labor market performance in the Latin American region. The paper shows that unemployment, informality, and inequality have been falling over the past two decades, though still remain high. By contrast, productivity has remained stubbornly low. The paper, then, turns to the potential impacts of various labor market institutions, including employment protection legislation (EPL), minimum wages (MW), payroll taxes, unemployment insurance (UI) and collective bargaining, as well as the impacts of demographic changes on labor market performance. The paper relies on evidence from carefully conducted studies based on micro-data for countries in the region and for other countries with similar income levels to draw conclusions on the impact of labor market institutions and demographic factors on unemployment, informality, inequality and productivity. The decreases in unemployment and informality can be partly explained by the reduced strictness of EPL and payroll taxes, but also by the increased shares of more educated and older workers. By contrast, the fall in inequality starting in 2002 can be explained by a combination of binding MW throughout most of the region and, to a lesser extent, by the introduction of UI systems in some countries and the role of unions in countries with moderate unionization rates. Falling inequality can also be explained by the fall in the returns to skill associated with increased share of more educated and older workers. |
| Date: | 2019–07–17 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:19/155&r=all |
| By: | Fache Rousová, Linda; Giuzio, Margherita |
| Abstract: | Traditionally, insurers are seen as stabilisers of financial markets that act countercyclically by buying assets whose price falls. Recent studies challenge this view by providing empirical evidence of procyclicality. This paper sheds new light on the underlying reasons for these opposing views. Our model predicts procyclicality when prices fall due to increasing risk premia, and countercyclicality in response to rises in the risk-free rate. Using granular data on insurers’ government bond holdings, we validate these predictions empirically. Our findings contribute to the current policy discussion on macroprudential measures beyond banking. JEL Classification: G01, G11, G12, G22, G23 |
| Keywords: | cyclicality, financial stability, insurance companies, portfolio allocation, sovereign debt crisis |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20192299&r=all |
| By: | Cho, Yunho; Morley, James; Singh, Aarti |
| Abstract: | We examine how households with different homeownership status and balance sheet positions respond to income shocks using panel datasets for the United States and Australia. Mortgaged homeowners and households with high debt and low levels of liquid assets have larger responses to transitory income shocks, especially in the United States. Time-varying estimates suggest that mortgaged homeowners exhibited particularly high sensitivity to transitory income shocks when debt levels were high during the Great Recession in the United States and the recent housing boom in Australia. Meanwhile, in both countries, households with higher wealth have more consumption insurance against permanent income shocks. |
| Keywords: | Household balance sheets; Transitory income shocks; Permanent in-come; Consumption insurance. |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:syd:wpaper:2019-11&r=all |
| By: | Hendrik Hakenes; Eva Schliephake |
| Abstract: | To provide maturity transformation, banks need a deposit base – deposits that could be, but are not, withdrawn most of the time and are, thus, used for long-term lending. In a global-games environment, we show that a higher deposit base protects banks against panic runs. As depositors become more flexible in their bank relations, keeping multiple accounts at different institutions, the deposit base of banks changes. We analyze the impact of multi-banking on bank stability and show that in an economy with specialized institutions, households allocate too few funds to maturity-transforming institutions (banks). A policy-maker should support the banks, even though they are more fragile. If only some institutions are protected by deposit insurance, the deposit base moves away from the unprotected institutions, leaving them more prone to runs. |
| Keywords: | Bank Runs, Deposit Base, Global Games, Financial Stability |
| JEL: | G21 G28 H23 |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2019_108&r=all |