Does Short-Term Debt Increase Vulnerability to Crisis? Evidence from the East Asian Financial Crisis

Efraim Benmelech, Eyal Dvir

Research output: Contribution to journalArticle

19 Citations (Scopus)

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.

Original languageEnglish (US)
Pages (from-to)485-494
Number of pages10
JournalJournal of International Economics
Volume89
Issue number2
DOIs
StatePublished - Mar 1 2013

Fingerprint

Asian financial crisis
Vulnerability
Short-term debt
Obligation
Distress
Financial crisis
Financial sector
Financial institutions
Asia
Endogeneity
Long-term debt
Debt

Keywords

  • Bank Runs
  • Debt Maturity
  • East Asian Crisis
  • Financial Crises
  • Short-Term Debt

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

Cite this

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Does Short-Term Debt Increase Vulnerability to Crisis? Evidence from the East Asian Financial Crisis. / Benmelech, Efraim; Dvir, Eyal.

In: Journal of International Economics, Vol. 89, No. 2, 01.03.2013, p. 485-494.

Research output: Contribution to journalArticle

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