Abstract
Before the currency crisis of 1997-1998, East Asian financial intermediaries borrowed heavily in international markets. During the crisis, the intermediaries' stock market value declined sharply, and a sizable fraction of the institutions were closed or nationalized. We investigate how the short-term and the foreign-currency nature of the intermediaries' international borrowing contributed to these outcomes. From the impact of long-term international debt on the stock returns of surviving intermediaries, we observe the negative effects of the foreign-currency nature of international debt (liability dollarization). From the impact of short-term international debt on the likelihood of firm failure and on the size of surviving intermediaries' assets and liabilities, we observe the negative effects of the short-term nature of international debt (sudden stops).
Original language | English |
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Pages (from-to) | 436-452 |
Number of pages | 17 |
Journal | Pacific Basin Finance Journal |
Volume | 16 |
Issue number | 4 |
DOIs | |
Publication status | Published - 1 Sep 2008 |
Keywords
- Asian financial crisis
- Financial intermediaries
- International debt
- Liability dollarization
- Sudden stops
ASJC Scopus subject areas
- Finance
- Economics and Econometrics