Crises and Liquidity: Evidence and Interpretation

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 exchan...

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Bibliographic Details
Main Author: Detragiache, Enrica (Author)
Format: Electronic eBook
Language:English
Published: Washington, D.C International Monetary Fund 2001
Series:IMF Working Papers Working Paper No. 01/2
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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
Physical Description:1 Online-Ressource (30 p)
ISBN:1451841760
9781451841763

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