Deposit insurance structure and deposit growth dynamics: a cross-country empirical exploration

This study investigates the impact of Deposit Insurance Systems (DISs) structure on deposit growth across 40 major global economies. Using panel data regression and an instrumental variable model, we find that government-administered DISs significantly reduce deposit growth, particularly in developed economies where private administration is preferred. A key contribution is the identification of DIS implementation timelines as a critical determinant of deposit dynamics. Countries introducing DISs post-2005 experience stronger deposit growth, while earlier adopters show mixed outcomes. The study also uncovers economic-size-specific heterogeneity, revealing that developed nations favor private DISs frameworks, whereas emerging economies lean towards government-backed models. This research provides novel insights into how the DIS administration influences depositor confidence and financial stability. The findings highlight the need for policymakers to tailor their DIS frameworks to national economic structures, ensuring an optimal balance between depositor protection, financial resilience, and systemic risk mitigation. This study offers a rigorous empirical examination of how the administrative structure of Deposit Insurance Systems (DIS) - specifically, the public-private dichotomy- influences deposit growth across 40 major economies over a 23-year period. Employing fixed-effects panel regression and instrumental variable (2SLS) techniques, the paper addresses endogeneity by instrumenting DIS type with system mandate, premium structure, and regulatory scope. Findings reveal a significant negative association between government-administered DIS and deposit-to-GDP ratios, robust across alternative specifications and deposit measures. The research introduces a novel temporal framework, demonstrating that post-2005 DIS implementations exhibit stronger depositor responsiveness, indicating evolving confidence dynamics. Additionally, the study uncovers structural heterogeneity based on economic size and OECD membership, showing divergent deposit behaviors under different DIS types. This work advances the literature by linking DIS architecture to deposit-credit transmission mechanisms and systemic liquidity conditions. The results offer critical implications for macroprudential policy design, emphasizing the need for context-specific DIS frameworks that balance depositor protection with financial stability objectives.