Deposit Insurance and Money Market Freezes Export

@article{citeulike:6045094, abstract = {In the presence of deposit insurance, a rise in counterparty risk may cause a freeze in interbank money markets. We show this in a general equilibrium model with regionally-segmented bank-based retail financial markets, in which money markets facilitate the reallocation of funds across banks from different regions. Counterparty risk creates an asymmetry between banks in savings-rich regions, which remain marginally financed by the abundant regional insured deposits, and in savings-poor regions, which have to pay large spreads in money markets. This asymmetry distorts the aggregate allocation of credit and, in the presence of demand externalities, can cause large output losses.}, author = {Bruche, Max and Suarez, Javier}, citeulike-article-id = {6045094}, citeulike-linkout-0 = {http://ssrn.com/abstract=1403129}, citeulike-linkout-1 = {http://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1474611_code363019.pdf?abstractid=1403129&mirid=1}, day = {13}, journal = {Social Science Research Network Working Paper Series}, keywords = {bank, deposit, financial, freezes, insurance, market, markets, money, solvency}, month = {May}, posted-at = {2009-10-30 21:47:32}, priority = {2}, publisher = {SSRN}, title = {Deposit Insurance and Money Market Freezes}, url = {http://ssrn.com/abstract=1403129}, year = {2009} }

TY - JOUR ID - citeulike:6045094 L3 - citeulike-article-id:6045094 N2 - In the presence of deposit insurance, a rise in counterparty risk may cause a freeze in interbank money markets. We show this in a general equilibrium model with regionally-segmented bank-based retail financial markets, in which money markets facilitate the reallocation of funds across banks from different regions. Counterparty risk creates an asymmetry between banks in savings-rich regions, which remain marginally financed by the abundant regional insured deposits, and in savings-poor regions, which have to pay large spreads in money markets. This asymmetry distorts the aggregate allocation of credit and, in the presence of demand externalities, can cause large output losses. JF - Social Science Research Network Working Paper Series TI - Deposit Insurance and Money Market Freezes PB - SSRN KW - bank KW - deposit KW - financial KW - freezes KW - insurance KW - market KW - markets KW - money KW - solvency AU - Bruche, Max AU - Suarez, Javier PY - 2009/May/13/ UR - http://ssrn.com/abstract=1403129 ER -