Broner, Fernando A.Lorenzoni, GuidoSchmukler, Sergio L.2013-06-242013-06-242004-09https://hdl.handle.net/10986/14139The authors argue that emerging economies borrow short term due to the high risk premium charged by international capital markets on long-term debt. They first present a model where the debt maturity structure is the outcome of a risk-sharing problem between the government and bondholders. By issuing long-term debt, the government lowers the probability of a liquidity crisis, transferring risk to bondholders. In equilibrium, this risk is reflected in a higher risk premium and borrowing cost. Therefore, the government faces a tradeoff between safer long-term borrowing and cheaper short-term debt. Second, the authors construct a new database of sovereign bond prices and issuance. They show that emerging economies pay a positive term premium (a higher risk premium on long-term bonds than on short-term bonds). During crises, the term premium increases, with issuance shifting toward shorter maturities. This suggests that changes in bondholders' risk aversion are important to understand emerging market crises.en-USCC BY 3.0 IGOEMERGING ECONOMIESSHORT TERM BORROWINGRISK PREMIUMCAPITAL MARKETSLONG-TERM DEBTMATURITY ACCELERATIONRISK SHARINGLIQUIDITY (ECONOMICS)BOND TRANSFERBORROWING COSTSBOND PRICESWorld Bank10.1596/1813-9450-3389