Using Principal Components, the authors construct a 25-year time series index of financial liberalization for each of eight developing countries: Chile, Ghana, Indonesia, the Republic of Korea, Malaysia, Mexico, Turkey, and Zimbabwe. They use it in an econometric analysis of private saving in...

In the 1980s and 1990s several countries experienced banking crises. The authors try to identify features of the economic environment that tend to breed problems in the banking sector. They do so by economically estimating the probability of a systemic crisis, applying a multivariate logic model...

Herders in Mongolia have suffered tremendous losses in recent dzud (winter disasters), with livestock mortality rates of over 50 percent in some locales. This study examines the feasibility of offering insurance to compensate for animal deaths. Such an undertaking is challenging in any country....

Deposit insurance schemes and bank failure resolution systems are asked to fulfill conflicting public policy objectives: on the one hand, they are supposed to protect small depositors and prevent contagion risks from bank runs; on the other hand, they are supposed to minimize aggressive risk...

The main economic functions of the insurance sector are to cover financial risk and to mobilize long-term savings. The sector can also play an important role in developing the private sector and modernizing the securities market. But to play its economic and financial roles, the insurance sector...

The authors question the widespread belief that market discipline on banks cannot be effective in less developed financial environments. There is no systematic tendency for low-income countries to lack the prerequisites for market discipline. Offsetting factors to the weaker market and formal...

The authors argue that short termism, dollarization, and the use of foreign jurisdictions are endogenous ways of coping with systemic risks prevalent in emerging markets. They represent a symptom at least as much as a problem. These coping mechanisms are jointly determined and the choice of one...

Should deposit insurance be recommended? No. History teaches us three lessons: 1) deposit insurance was not adopted primarily to protect the depositor. There were many ways to increase the soundness of the banking system. The leading alternative was to allow branching and the diversification of...

The author explains how differences in the informational and contracting environments of countries affect the optimal design of their financial safety nets and their optimal strategies for managing financial crises. He explains how to design and operate safety nets at minimum cost to taxpayers...

Countries with small financial systems are generally small economies with a reduced dimension of institutional relationships, a greater concentration of wealth, and a relatively less independent civil service. These characteristics facilitate concentration of functions and, more generally, weak...