US Dollar Debt of Emerging Market Firms
Sasha Kofanova,
Aaron Walker and
Eden Hatzvi
Additional contact information
Sasha Kofanova: Reserve Bank of Australia
Aaron Walker: Reserve Bank of Australia
Eden Hatzvi: Reserve Bank of Australia
RBA Bulletin (Print copy discontinued), 2015, 49-58
Abstract:
US dollar-denominated borrowings by emerging market (EM) corporations have increased rapidly in recent years, raising concerns about possible currency mismatch risk. This article uses firm-level data from the top 100 EM corporate bond issuers and Bank for International Settlements (BIS) data on cross-border bank lending at the economy level to gauge such risk. These data indicate that around two-thirds of the largest issuers of US dollar-denominated corporate bonds are at least in part naturally hedged (based on company-specific information), and a significant share of the remaining borrowers are state-owned enterprises. The largest recipients of foreign currency bank loans by country also appear to derive significant US dollar export revenues. This suggests that most EM corporations that have borrowed in US dollars are well placed to weather an appreciation of the US dollar, particularly given the possibility that some have hedged their exposures via financial markets. However, Chinese property developers may be an exception and some EM resource companies may face difficulties as a result of the current low global commodity prices. Corporations will also face higher financing costs on their US dollar-denominated debt as the US Federal Reserve moves to increase its policy rate.
Keywords: Emerging markets; US dollar debt; foreign currency risk; foreign bank lending; corporate debt; currency mismatch; cross-border loans; corporate bond issuance; commodity prices; US dollar-denominated corporate bonds; natural hedging (search for similar items in EconPapers)
Date: 2015
References: Add references at CitEc
Citations: View citations in EconPapers (4)
Downloads: (external link)
https://www.rba.gov.au/publications/bulletin/2015/dec/pdf/bu-1215-6.pdf (application/pdf)
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:rba:rbabul:dec2015-06
Access Statistics for this article
RBA Bulletin (Print copy discontinued) is currently edited by Luci Ellis
More articles in RBA Bulletin (Print copy discontinued) from Reserve Bank of Australia Contact information at EDIRC.
Bibliographic data for series maintained by Paula Drew (drewp@rba.gov.au).