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Global dollar credit and carry trades: a firm-level analysis

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  • Valentina Bruno
  • Hyun Song Shin

Abstract

We conduct a firm-level analysis of borrowing in US dollars by non-financial corporates from outside the United States. The dataset combines bond issuance data with firm-level financial information. We find that firms with already high cash holdings are more likely to issue US dollar-denominated bonds, and that the proceeds of the bond issue add to cash holdings. The tendency to add cash is more pronounced during periods when the dollar carry trade is more favourable and is prevalent for emerging market firms.

Suggested Citation

  • Valentina Bruno & Hyun Song Shin, 2015. "Global dollar credit and carry trades: a firm-level analysis," BIS Working Papers 510, Bank for International Settlements.
  • Handle: RePEc:bis:biswps:510
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    1. repec:bis:bisifb:45 is not listed on IDEAS
    2. Ayala, Diana & Nedeljkovic, Milan & Saborowski, Christian, 2017. "What slice of the pie? The corporate bond market boom in emerging economies," Journal of Financial Stability, Elsevier, vol. 30(C), pages 16-35.
    3. Cortina Lorente,Juan Jose & Didier Brandao,Tatiana & Schmukler,Sergio L. & Cortina Lorente,Juan Jose & Didier Brandao,Tatiana & Schmukler,Sergio L., 2017. "Corporate debt maturity in developing countries : sources of long- and short-termism," Policy Research Working Paper Series 8222, The World Bank.
    4. Chang, Roberto & Fernández, Andrés & Gulan, Adam, 2017. "Bond finance, bank credit, and aggregate fluctuations in an open economy," Journal of Monetary Economics, Elsevier, vol. 85(C), pages 90-109.
    5. Ramon Moreno & José María Serena Garralda, 2018. "Firms' credit risk and the onshore transmission of the global financial cycle," BIS Working Papers 712, Bank for International Settlements.
    6. Annina Kaltenbrunner & Juan Pablo Painceira, 2016. "International and Domestic Financialisation in Middle Income Countries; The Brazilian Experience," Working papers wpaper146, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    7. Kei-Ichiro Inaba, 2018. "Global Stock Return Comovements: Trends and Determinants," Bank of Japan Working Paper Series 18-E-7, Bank of Japan.
    8. repec:bis:bisbps:95 is not listed on IDEAS
    9. repec:bis:bisqtr:1709e is not listed on IDEAS
    10. Huang, Yi & Panizza, Ugo & Portes, Richard, 2018. "Corporate foreign bond issuance and interfirm loans in China," CEPR Discussion Papers 12865, C.E.P.R. Discussion Papers.
    11. Caballero, Julian & Panizza, Ugo & Powell, Andrew, 2015. "The second wave of global liquidity: Why are firms acting like financial intermediaries?," CEPR Discussion Papers 10926, C.E.P.R. Discussion Papers.
    12. Calomiris,Charles W. & Larrain,Mauricio & Schmukler,Sergio L., 2018. "Capital inflows, equity issuance activity, and corporate investment," Policy Research Working Paper Series 8405, The World Bank.
    13. repec:wsi:jicepx:v:08:y:2017:i:03:n:s179399331750017x is not listed on IDEAS
    14. Alberto Fuertes & José María Serena, 2016. "How firms borrow in international bond markets: securities regulation and market segmentation," Working Papers 1603, Banco de España;Working Papers Homepage.
    15. Ethan Ilzetzki & Carmen M. Reinhart & Kenneth S. Rogoff, 2017. "Exchange Arrangements Entering the 21st Century: Which Anchor Will Hold?," NBER Working Papers 23134, National Bureau of Economic Research, Inc.
    16. Chang, Roberto & Fernández, Andrés & Gulan, Adam, 2017. "Bond finance, bank credit, and aggregate fluctuations in an open economy," Journal of Monetary Economics, Elsevier, vol. 85(C), pages 90-109.
    17. Alfaro, Laura & Asis, Gonzalo & Chari, Anusha & Panizza, Ugo, 2017. "Lessons Unlearned? Corporate Debt in Emerging Markets," CEPR Discussion Papers 12038, C.E.P.R. Discussion Papers.
    18. Emanuel Kohlscheen & Andrés Murcia Pabón & Juan Contreras, 2018. "Determinants of bank profitability in emerging markets," BIS Working Papers 686, Bank for International Settlements.
    19. Madhusudan Mohanty, 2015. "What do new forms of finance mean for EM central banks? - An Overview," BIS Papers chapters,in: Bank for International Settlements (ed.), What do new forms of finance mean for EM central banks?, volume 83, pages 1-8 Bank for International Settlements.
    20. Caballero, Julian & Panizza, Ugo & Powell, Andrew, 2015. "The second wave of global liquidity: Why are firms acting like financial intermediaries?," CEPR Discussion Papers 10926, C.E.P.R. Discussion Papers.
    21. Hossfeld, Oliver & Pramor, Marcus, 2018. "Global liquidity and exchange market pressure in emerging market economies," Discussion Papers 05/2018, Deutsche Bundesbank.
    22. Michael Chui & Emese Kuruc & Philip Turner, 2016. "A new dimension to currency mismatches in the emerging markets - non-financial companies," BIS Working Papers 550, Bank for International Settlements.
    23. repec:bis:bisifc:45-18 is not listed on IDEAS
    24. Huang, Anni & Kishor, N. Kundan, 2017. "Corporate Overseas Debt Issuance in the Context of Global Liquidity Transmission," MPRA Paper 83476, University Library of Munich, Germany.
    25. repec:fau:fauart:v:67:y:2017:i:6:p:492-511 is not listed on IDEAS

    More about this item

    Keywords

    emerging markets; bond issuance; surrogate intermediaries;

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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