Debt Maturity Structure with Pre-Emptive Creditors

Bank of England Working Paper No. 201

28 Pages Posted: 8 Sep 2004

See all articles by Prasanna Gai

Prasanna Gai

Bank of England

Hyun Song Shin

Bank for International Settlements (BIS)

Date Written: September 2003

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. We model such pre-emptive behaviour explicitly and explore the implications for the maturity profile of debt. We find that crisis management instruments designed to improve the recovery process for claimholders do not necessarily skew the maturity structure towards the shorter term.

Keywords: Debt maturity, international financial architecture, creditor pre-emption

JEL Classification: F33, F34

Suggested Citation

Gai, Prasanna and Shin, Hyun Song, Debt Maturity Structure with Pre-Emptive Creditors (September 2003). Bank of England Working Paper No. 201. Available at SSRN: https://ssrn.com/abstract=536082 or http://dx.doi.org/10.2139/ssrn.536082

Prasanna Gai (Contact Author)

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom
+020 7601 3583 (Phone)

Hyun Song Shin

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

HOME PAGE: http://www.bis.org/author/hyun_song_shin.htm

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