Dash for Dollars

Ambrogio Cesa-Bianchi, Robert Czech and Fernando Eguren Martin

No 16415, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We document a `dash for dollars' in corporate bond markets during the Covid-19 turmoil period. Within-firm variation of corporate bond spreads and transaction volumes reveals that US dollar-denominated bonds experienced larger spread increases and selling pressures relative to non-dollar bonds. To interpret these findings, we quantify the importance of two different hypotheses linked to the dollar's hegemony in the international financial system, namely its superior liquidity and its dominance as a funding currency. Our results highlight the importance of the funding hypothesis, which suggests that investors sold their dollar-denominated assets to meet immediate dollar obligations.

Keywords: Heterogeneity; Credit spreads; Liquidity; Dash-for-cash; Us dollar; Covid-19; Event-study; Identification (search for similar items in EconPapers)
JEL-codes: E44 E58 G01 G12 G15 G18 (search for similar items in EconPapers)
Date: 2021-08
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Working Paper: Dash for Dollars (2023)
Working Paper: Dash for dollars (2021)
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