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Financial Crises and the Role of Debt Maturity for Emerging Economies
| Content Provider | Scilit |
|---|---|
| Author | Shen, Hewei |
| Copyright Year | 2018 |
| Description | Journal: SSRN Electronic Journal This paper studies the role of debt maturity for small open economies subject to endogenous financial crises. It uses an off-the-shelf two-sector DSGE model featuring collateral constraints and endogenous financial crises but allows the duration of the bond in the economy to vary. This model generates a trade-off between the borrowing cost and insurance benefit of a long-term bond. On one hand, it is more costly for small open economies to borrow through the long-term bond than the short-term bond. On the other hand, a long-term bond also provides an insurance benefit against aggregate shocks and the probability of financial crises declines monotonically in the duration of the bond. As a result, the quantitative analysis shows that the ex-ante welfare is maximized when the duration of the bond in the economy is six quarters and this result sheds some light on why emerging mark. |
| Related Links | https://caepr.indiana.edu/RePEc/inu/caeprp/CAEPR2017-012.pdf https://papers.ssrn.com/sol3/Delivery.cfm?abstractid=3068302 |
| ISSN | 10914358 |
| e-ISSN | 15565068 |
| DOI | 10.2139/ssrn.3068302 |
| Journal | SSRN Electronic Journal |
| Language | English |
| Publisher | Elsevier BV |
| Publisher Date | 2018-03-20 |
| Access Restriction | Open |
| Subject Keyword | Journal: SSRN Electronic Journal Bond Duration Credit Constraints Financial Crises |
| Content Type | Text |
| Resource Type | Article |
| Subject | Public Health, Environmental and Occupational Health Psychiatry and Mental Health |
