Dash for dollars

43 Pages Posted: 9 Aug 2021

Multiple version iconThere are 2 versions of this paper

Date Written: July 23, 2021

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.

Keywords: Heterogeneity, credit spreads, liquidity, dash-for-cash, US dollar, Covid-19, event-study, identification

JEL Classification: E44, E58, G01, G12, G15, G18

Suggested Citation

Cesa-Bianchi, Ambrogio and Eguren Martin, Fernando, Dash for dollars (July 23, 2021). Bank of England Working Paper No. 932, Available at SSRN: https://ssrn.com/abstract=3900535 or http://dx.doi.org/10.2139/ssrn.3900535

Ambrogio Cesa-Bianchi (Contact Author)

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

HOME PAGE: http://https://sites.google.com/site/ambropo/

Fernando Eguren Martin

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

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