Discussion paper

DP16415 Dash for Dollars

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.


Cesa-Bianchi, A and F Eguren Martin (eds) (2021), “DP16415 Dash for Dollars”, CEPR Press Discussion Paper No. 16415. https://cepr.org/publications/dp16415