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

Format:

Book

Author/Creator:

Benmelech, Efraim.

Contributor:

National Bureau of Economic Research.

Dvir, Eyal.

Series:

Working Paper Series (National Bureau of Economic Research) no. w17468.

NBER working paper series no. w17468

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2011.

Summary:

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.

Notes:

Print version record

September 2011.