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Currency choice in international bond issuance

Author

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  • Benjamin H Cohen

Abstract

Aggregate issuance of international bonds is found to be significantly higher in strong currencies than in weak ones. The mix of currencies is also found to be influenced by interest rate differentials, with greater issuance in higher-yielding currencies, and by the amount of home country issuance. Taken together, the results suggest that both the investor's and the issuer's preferences determine currency choice in international bond issuance.

Suggested Citation

  • Benjamin H Cohen, 2005. "Currency choice in international bond issuance," BIS Quarterly Review, Bank for International Settlements, June.
  • Handle: RePEc:bis:bisqtr:0506e
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    References listed on IDEAS

    as
    1. John Y. Campbell & Luis M. Viceira & Joshua S. White, 2003. "Foreign Currency for Long-Term Investors," Economic Journal, Royal Economic Society, vol. 113(486), pages 1-25, March.
    2. Solnik, Bruno H., 1974. "An equilibrium model of the international capital market," Journal of Economic Theory, Elsevier, vol. 8(4), pages 500-524, August.
    3. Huffman, Stephen P. & Makar, Stephen D., 2004. "The effectiveness of currency-hedging techniques over multiple return horizons for foreign-denominated debt issuers," Journal of Multinational Financial Management, Elsevier, pages 105-115.
    4. Matti Keloharju & Mervi Niskanen, 2001. "Why Do Firms Raise Foreign Currency Denominated Debt? Evidence from Finland," European Financial Management, European Financial Management Association, vol. 7(4), pages 481-496.
    5. Froot, Kenneth A & Thaler, Richard H, 1990. "Foreign Exchange," Journal of Economic Perspectives, American Economic Association, pages 179-192.
    6. Johnson, David, 1988. "The currency denomination of long-term debt in the Canadian corporate sector: An empirical analysis," Journal of International Money and Finance, Elsevier, vol. 7(1), pages 77-90, March.
    7. Fletcher, Donna J & Taylor, Larry W, 1996. ""Swap" Covered Interest Parity in Long-Date Capital Markets," The Review of Economics and Statistics, MIT Press, pages 530-538.
    8. Clinton, Kevin, 1988. "Transactions Costs and Covered Interest Arbitrage: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 358-370, April.
    9. Kim, Yong Cheol & Stulz, ReneM., 1988. "The Eurobond market and corporate financial policy : A test of the clientele hypothesis," Journal of Financial Economics, Elsevier, vol. 22(2), pages 189-205, December.
    10. Geczy, Christopher & Minton, Bernadette A & Schrand, Catherine, 1997. " Why Firms Use Currency Derivatives," Journal of Finance, American Finance Association, vol. 52(4), pages 1323-1354, September.
    11. Allayannis, George & Ofek, Eli, 2001. "Exchange rate exposure, hedging, and the use of foreign currency derivatives," Journal of International Money and Finance, Elsevier, vol. 20(2), pages 273-296, April.
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    More about this item

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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