Origins of the Maturity and Currency Mismatches in the Balance Sheet of Emerging Countries: a Theoretical Approach

Irina Bunda (1)

1 LEO - Laboratoire d'économie d'Orleans [2008-2011]

The aim of this paper is to highlight the origins of the currency and maturity mismatches in the balance sheets of emerging countries. We show that short-term debt in the form of demandable debt works as a commitment device of the financial intermediary and as a form of protection of foreign lenders in a context of poor enforceability of contracts. The currency mismatch in the non-tradable sector is mainly viewed as a supply-side phenomenon. It results from the choice of foreign lenders whose anticipations of exchange rate risk overpass those of default of the banking and/or private sector following a real adverse shock. Finally, when it comes to simultaneously explain the maturity and the currency composition of debt, the paper shows that the short-term foreign currency denominated debt, with the option of early withdrawal of the demandable debt, allows investors to offset the debtor default risk if a currency depreciation occurs.

Mots clés: maturity mismatch; currency mismatch; real exchange rate; international financial crises.; international financial crises

Domaines: Economies et finances

Irina Bunda. Origins of the Maturity and Currency Mismatches in the Balance Sheet of Emerging Countries: a Theoretical Approach. Symposium on Banking and Monetary Economics, Jun 2003, Birmingham, United Kingdom. ⟨halshs-00424465⟩