Banks, Maturity Mismatches and Liquidity Crises: A Simple Model

CIES Working Paper No. 132

14 Pages Posted: 21 Dec 2001

Date Written: July 2001

Abstract

In determining the maturity structure of bank loans in the presence of pre-determined, short-term international liabilities, we show that maturity mismatches in banks' balance sheets are fully consistent with the assumption of banks acting as self-interested, optimising agents. Although often attributed to the moral hazard associated with safety nets, the analysis shows that financial crises can occur in their absence.

Keywords: banks, currency crisis, East Asia, maturity mismatches, moral hazard

JEL Classification: F34, F39, G21

Suggested Citation

Rajan, Ramkishen S., Banks, Maturity Mismatches and Liquidity Crises: A Simple Model (July 2001). CIES Working Paper No. 132, Available at SSRN: https://ssrn.com/abstract=294584 or http://dx.doi.org/10.2139/ssrn.294584

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