Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
962342 | Journal of International Economics | 2013 | 10 Pages |
Abstract
Does short-term debt increase vulnerability to financial crisis, or does short-term debt reflect - rather than cause - the incipient crisis? We study the role that short-term debt played in the collapse of the East Asian financial sector in 1997-1998. We alleviate concerns about the endogeneity of short-term debt by using long-term debt obligations that matured during the crisis. We find that debt obligations issued at least three years before the crisis had a negative, albeit sometimes insignificant, effect on the probability of failure. Our results are consistent with the view that short-term debt reflects, rather than causes, distress in financial institutions.
Related Topics
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Authors
Efraim Benmelech, Eyal Dvir,