Discussion Paper Details

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Title: Debt Maturity and the Global Financial Architecture

Author(s): Olivier Jeanne

Publication Date: August 2000

Keyword(s): Capital Controls, Debt Maturity, International Debt, Lending In Last Resort and Liquidity Crises

Programme Area(s): International Macroeconomics

Abstract: The paper starts from the premise that the debate on the ?new architecture? of the international financial system should be based on a theory that endogenizes the structure of countries' external liabilities. I present a model in which the maturity of a country's external sovereign debt is the solution to an incentives problem, which may lead to reliance on short-term debt and vulnerability to runs. I study, in the context of this model, the welfare effects of an international lender of last resort, measures aimed at coordinating creditors in crises, and a tax on short-term capital flows. These measures may increase or decrease global welfare, and always leave it strictly below the first-best level.

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Bibliographic Reference

Jeanne, O. 2000. 'Debt Maturity and the Global Financial Architecture'. London, Centre for Economic Policy Research.