Imports, Exports, and the Currency Composition of Corporate Debt

Yang Jiao () and Ohyun Kwon
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Yang Jiao: Fanhai International School of Finance, Fudan University

No 202518, Working Papers from Center for Global Policy Analysis, LeBow College of Business, Drexel University

Abstract: This paper investigates firm-level linkage between international finance and trade. Specifically, we present evidence that Korean firms rely more on financing in foreign currency if there is a positive export shock. We address the crucial endogeneity problem by capitalizing on South Korea’s as well as its trading partners’ demand shocks. We further show that global supply chains also play an important role as higher imported intermediate input shares induce lower foreign currency debt shares. Our findings point to a firm-level hedging channel and are pertinent to exchange rate policies that aim to reduce a (developing) country’s vulnerability to exchange rate shocks.

Keywords: Trade Shocks; Debt Finance; Currency Composition; Exchange Rate Risk; Global Supply Chains (search for similar items in EconPapers)
JEL-codes: F14 F31 G32 (search for similar items in EconPapers)
Pages: 74
Date: 2025-04
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