Sudden stops and liability dollarization: Evidence from Asia's financial intermediaries

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3 Citations (Scopus)

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 languageEnglish
Pages (from-to)436-452
Number of pages17
JournalPacific Basin Finance Journal
Volume16
Issue number4
DOIs
Publication statusPublished - 1 Sep 2008

Keywords

  • Asian financial crisis
  • Financial intermediaries
  • International debt
  • Liability dollarization
  • Sudden stops

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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