Matching Basic DIS Design To Country-Specific Conditions

This paper presents a framework, which helps to relate the choice of a basic design for deposit insurance to the special economic and institutional environments of a country. Based on new empirical evidence, the study extends the recent academic effort on optimal DIS designing and suggests that, though limited in number, there are economies whose development stage makes them especially prone to system-wide bank runs and requires more generous (full with an upper limit) protection of deposit balances as the optimal basic design for deposit insurance. The empirical section reports several findings related to the regularities of depositor panic contagion, cross-country variability in depositor reaction to bank failures, and funding of economic development by the domestic credit resources. * Postdoctoral Fellow, Faculty of Economics & Faculty of Business and Commerce, Keio University The 21 Century Center of Excellence Program Faculty of Economics and Faculty of Business and Commerce, Keio University 2-15-45 Mita, Minato-ku, Tokyo 108-8345, Japan Matching Basic DIS Design To Country-Specific Conditions