Dash for dollars
43 Pages Posted: 9 Aug 2021
There are 2 versions of this paper
Dash for dollars
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: Suggested Citation