Debt maturity structure with pre-emptive creditors

Prasanna Gai and Hyun Song Shin

Bank of England working papers from Bank of England

Abstract: Recent experience with financial crises has led to scepticism about the efficacy of crisis management measures that target short-term debt, such as the voluntary/concerted rollovers of interbank lines. Such measures, it is suggested, heighten financial fragility by encouraging creditors to pre-empt each other by lending at ever shorter maturities. Pre-emptive behaviour of this type is modelled explicitly and the implications for the maturity profile of debt explored. It is found that crisis management instruments designed to improve the recovery process for claimholders do not necessarily skew the maturity structure towards the shorter term.

Date: 2003-09
New Economics Papers: this item is included in nep-ifn and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:201

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