The Dollar and Corporate Borrowing Costs

62 Pages Posted: 23 Jun 2020

See all articles by Ralf Meisenzahl

Ralf Meisenzahl

Federal Reserve Bank of Chicago

Friederike Niepmann

Board of Governors of the Federal Reserve System; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Tim Schmidt-Eisenlohr

Board of Governors of the Federal Reserve System

Multiple version iconThere are 2 versions of this paper

Date Written: 2020

Abstract

We show that U.S. dollar movements affect syndicated loan terms for U.S. borrowers, even for those without trade exposure. We identify the effect of dollar movements using spread and loan amount adjustments during the syndication process. Using this high-frequency, within loan variation, we find that a one standard deviation increase in the dollar index increases spreads by up to 15 basis points and reduces loan amounts and underpricing by up to 2 percent and 7 basis points, respectively. These effects are concentrated in dollar appreciations. Our results suggest that global factors reflected in the dollar determine U.S. borrowing costs.

Keywords: loan pricing, syndicated loans, dollar, institutional investors, risk taking

JEL Classification: F150, G150, G210, G230

Suggested Citation

Meisenzahl, Ralf and Niepmann, Friederike and Schmidt-Eisenlohr, Tim, The Dollar and Corporate Borrowing Costs (2020). CESifo Working Paper No. 8376, Available at SSRN: https://ssrn.com/abstract=3633661

Ralf Meisenzahl (Contact Author)

Federal Reserve Bank of Chicago ( email )

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Chicago, IL 60604
United States

HOME PAGE: http://www.ralfmeisenzahl.com

Friederike Niepmann

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Tim Schmidt-Eisenlohr

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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