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

Efraim Benmelech and Eyal Dvir ()

Journal of International Economics, 2013, vol. 89, issue 2, 485-494

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.

Keywords: Short-Term Debt; Debt Maturity; Financial Crises; East Asian Crisis; Bank Runs (search for similar items in EconPapers)
JEL-codes: F34 G21 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (31)

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Related works:
Working Paper: Does Short-Term Debt Increase Vulnerability to Crisis? Evidence from the East Asian Financial Crisis (2011)
Journal Article: Does short-term debt increase vulnerability to crisis? Evidence from the East Asian financial crisis (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:89:y:2013:i:2:p:485-494

DOI: 10.1016/j.jinteco.2011.12.004

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