Discussion Paper Details

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Title: Dash for Dollars

Author(s): Ambrogio Cesa-Bianchi and Fernando Eguren Martin

Publication Date: August 2021

Keyword(s): COVID-19, credit spreads, Dash-for-cash, Event-Study, Heterogeneity, identification, liquidity and Us dollar

Programme Area(s): International Macroeconomics and Finance

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.

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Bibliographic Reference

Cesa-Bianchi, A and Eguren Martin, F. 2021. 'Dash for Dollars'. London, Centre for Economic Policy Research.