Kiel Working Papers, Kiel Institute for World Economics
No 994:
Determinants of Short-Term Debt
Claudia M. Buch and Lusine Lusinyan
Abstract: One key focus of the on-going debate on the integration of
international financial markets have been measures to lengthen the maturity
of foreign debt. Short-term debt is typically considered to be volatile and
thus a potential trigger of currency crises. In contrast to the vivid
policy debate on these issues, there is relatively little theoretical and
empirical evidence on the determinants of short-term debt. This paper
summarizes the theoretical literature on the issue and presents a stylized
theoretical model, which focuses on the risks and benefits of short-term
debt under conditions of uncertainty. Empirical evidence shows that the
level of economic development, the presence of financial centres, and the
share of loans to banks have a positive impact on the share of short-term
loans. OECD membership, in contrast, has a negative influence.
29 pages, July 2000
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