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That's how we roll: An experiment on rollover risk

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  • Bosch-Rosa, Ciril

Abstract

We design a continuous-time experiment to study how different short-term credit maturities interact with the state of the economy. We find that, when the economy is in a boom, long maturities stabilize the credit market. Yet, when in a downturn, such maturities increase the likelihood of credit freezes. This result has important regulatory implications, as it suggests that a policy aimed at reducing maturity mismatch in short-term credit markets might backfire during a recession.

Suggested Citation

  • Bosch-Rosa, Ciril, 2018. "That's how we roll: An experiment on rollover risk," Journal of Economic Behavior & Organization, Elsevier, vol. 145(C), pages 495-510.
  • Handle: RePEc:eee:jeborg:v:145:y:2018:i:c:p:495-510
    DOI: 10.1016/j.jebo.2017.11.005
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    References listed on IDEAS

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    More about this item

    Keywords

    Experiment; Financial crisis; Continuous-time; Short-term credit;

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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