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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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