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Dash for Dollars

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  • Cesa-Bianchi, Ambrogio
  • Eguren Martin, Fernando

Abstract

Within-firm variation of corporate bond spreads around the Covid-19 outbreak shows that US dollar-denominated bonds experienced larger increases in spreads relative to non-dollar bonds, especially at short maturities. Differently, in the non-dollar sample it was the spreads of longer maturity bonds that widened more markedly. Price pressures arising from a liquidity-driven dash for cash alone cannot rationalize these findings. Instead, the patterns we uncover suggest a `dash for dollars', in which investors sold their dollar-denominated assets first, with a consequent impact on prices. We link these dynamics to the dominant role of the US dollar in the international financial system.

Suggested Citation

  • Cesa-Bianchi, Ambrogio & Eguren Martin, Fernando, 2021. "Dash for Dollars," CEPR Discussion Papers 16415, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:16415
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    Cited by:

    1. Simon Gilchrist & Bin Wei & Vivian Z. Yue & Egon Zakrajšek, 2020. "The Fed Takes On Corporate Credit Risk: An Analysis of the Efficacy of the SMCCF," FRB Atlanta Working Paper 2020-18, Federal Reserve Bank of Atlanta.
    2. Javier Bianchi & Saki Bigio & Charles Engel, 2021. "Scrambling for Dollars: International Liquidity, Banks and Exchange Rates," Working Papers 786, Federal Reserve Bank of Minneapolis.

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    More about this item

    Keywords

    COVID-19; credit spreads; Dash-for-cash; Event-Study; Heterogeneity; identification; liquidity; Us dollar;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G01 - Financial Economics - - General - - - Financial Crises
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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