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Debt maturity structure with pre-emptive creditors

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  • Prasanna Gai
  • Hyun Song Shin

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.

Suggested Citation

  • Prasanna Gai & Hyun Song Shin, 2003. "Debt maturity structure with pre-emptive creditors," Bank of England working papers 201, Bank of England.
    • Handle: RePEc:boe:boeewp:201
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    References listed on IDEAS

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    Cited by:

    1. Corsetti, Giancarlo & Guimaraes, Bernardo & Roubini, Nouriel, 2006. "International lending of last resort and moral hazard: A model of IMF's catalytic finance," Journal of Monetary Economics, Elsevier, vol. 53(3), pages 441-471, April.
    2. Aitor Erce, 2013. "Sovereign debt crises: could an international court minimize them?," Globalization Institute Working Papers 142, Federal Reserve Bank of Dallas.
    3. Aitor Erce-Domínguez, 2006. "Using standstills to manage sovereign debt crises," Working Papers 0636, Banco de España.
    4. Kartik Anand & James Chapman & Prasanna Gai, 2012. "Covered bonds, core markets, and financial stability," SFB 649 Discussion Papers SFB649DP2012-065, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.

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