Crises and Liquidity: Evidence and Interpretation

By Enrica Detragiache, Antonio Spilimbergo

January 1, 2001

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Format: Chicago

Enrica Detragiache, and Antonio Spilimbergo. Crises and Liquidity: Evidence and Interpretation, (USA: International Monetary Fund, 2001) accessed December 3, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

In a large panel of countries, we find that less liquid countries are more likely to default on their external debt. Specifically, for given total external debt, the probability of a crisis increases with the proportion of short-term debt and debt service coming due and decreases with foreign exchange reserves. This correlation, however, is consistent with a standard model of optimal default and need not be ascribed to self-fulfilling creditor runs. Also, the correlation with short-term debt appears to be driven by joint endogeneity. The policy implications are discussed.

Subject: Asset and liability management, Debt default, Debt service, External debt, Financial crises, Liquidity

Keywords: Creditor runs, Crisis definition, Crisis determinant, Crisis observation, Crisis probability, Debt crises, Debt crisis, Debt crisis variable, Debt default, Debt service, Debt service due, Default, East Asia, Global, Interest rate, Liquidity, Liquidity variable, Share of short-term debt, WP

Publication Details

Pages:

30
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2001/002
Stock No:

WPIEA0022001
ISBN:

9781451841763
ISSN:

1018-5941

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