Three essays on deposit insurance

Three deposit insurance studies in applied economics are presented. These essays all focus on the amount of deposit insurance coverage. Deposit insurance legislation currently being considered by the U.S. Congress proposes to increase the nominal level of insurance coverage for the first time since 1980. The first two essays examine relationship between bank risk and real deposit insurance coverage in the U.S. The testable hypothesis is that bank risk is positively related to the amount of real coverage. The first essay examines the relationship between real coverage and bank risk at individual banks over the last 10 years. The findings suggest that the change in real coverage over time has not been associated with a change in risk at commercial bank.; The second essay is a time-series analysis using aggregate data for the U.S. banking system from 1934 through 2004. The findings provide mixed results. Real coverage is associated with the percentage of bank deposits insured and therefore risk to the insurance fund. However, it is not associated with variation in bank profits. When real coverage is compared to the book value of bank equity, the results depend on how the legislation of the late 1980's--early 1990's period is specified. There is weak support for the moral hazard hypothesis in some cases and no support in others.; The third essay analyzes deposit insurance across the world examining the impact of demographic, social, and political factors on the presence of an explicit deposit insurance system. Moreover, for a subset of countries with explicit deposit insurance system we try to identify demographic, political, economic, and financial factors that affect the level of deposit insurance coverage. The findings suggest that the level of income, life expectancy, political rights and the percentage of urban population are related to whether an explicit deposit insurance system is in place or not. For countries with explicit deposit insurance systems, income, life expectancy, the importance of the banking sector within the financial system, the development of the domestic banking sector and political freedom have a significant impact on the level of deposit insurance coverage.