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Title: The Dollar and Corporate Borrowing Costs

Author(s): Ralf Meisenzahl, Friederike Niepmann and Tim Schmidt-Eisenlohr

Publication Date: June 2020

Keyword(s): Dollar, institutional investors, Loan pricing, Risk Taking and syndicated loans

Programme Area(s): International Macroeconomics and Finance

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.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=14892

Bibliographic Reference

Meisenzahl, R, Niepmann, F and Schmidt-Eisenlohr, T. 2020. 'The Dollar and Corporate Borrowing Costs'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=14892