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Title:	Why do emerging economies borrow short term?
Author:	Broner, Fernando; Lorenzoni, Guido; Schumkler, Sergio L.
Abstract:	We argue that one reason why emerging economies borrow short term is that it is cheaper than borrowing long term. This is especially the case during crises, as in these episodes the relative cost of long-term borrowing increases. We construct a unique database of sovereign bond prices, returns, and issuances at di¤erent maturities for 11 emerging economies from 1990 to 2009 and present a set of new stylized facts. On average, these countries pay a higher risk premium on long-term than on short-term bonds. During crises, the difference between the two risk premia increases and issuance shifts towards shorter maturities. To illustrate our argument, we present a simple model in which the maturity structure is the outcome of a risk sharing problem between an emerging economy subject to rollover crises and risk averse international investors.
Abstract:	Broner thanks the Spanish Ministry of Science and Innovation, the Generalitat de Catalunya, and the European Research Council (FP7/2007-2013, grant 263846).
Subject(s):	-Emerging markets -Debt crises -Investor risk aversion -Maturity structure -Risk premium -Term premium
Rights:	This is the peer reviewed version of the following article: Broner FA, Lorenzoni G, Schmukler SL. Why do emerging economies borrow short term? J Eur Econ Assoc. 2013 Jan 3;11 Suppl 1:67-100, which has been published in final form at http://dx.doi.org/10.1111/j.1542-4774.2012.01094.x. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.
Document type:	Article Article - Accepted version
Published by:	Wiley
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