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Deposit Insurance Regulatory forbearance and Economic Growth: Implications for the Japanese Banking Crisis
Author:
Kenneth Kletzer null

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Mr. Robert Dekle
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Series:
IMF Working Papers
Volume/Issue:
Volume 2005: Issue 169
Language:
English
Publication Date:
01 Aug 2005
DOI:
https://doi.org/10.5089/9781451861884.001
ISBN:
9781451861884
ISSN:
1018-5941
Pages:
34
Keywords:
WP; rate of interest; capital stock; banking sector; Japanese economy; banking crises; economic growth; insurance liability; bank equity ratio; withdrawal demand; bank dividend; bank financing; Deposit insurance; Stocks; Loans; Bank credit; East Asia
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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An endogenous growth model with financial intermediation demonstrates how deposit insurance and prudential regulatory forbearance lead to banking crises and growth declines. The model assumptions are based on features of the Japanese financial system and regulation. The model demonstrates how banking and growth crises can evolve under perfect foresight. The dynamics for economic aggregates and asset prices predicted by the model are shown to be generally consistent with the experience of the Japanese economy and financial system through the 1990s. We also test our maintained hypothesis of rational expectations using asset price data for Japan over the 1980s and 1990s.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund