Working Paper: CEPR ID: DP14892
Authors: Ralf Meisenzahl; Friederike Niepmann; Tim Schmidteisenlohr
Abstract: We show that U.S. dollar movements affect syndicated loan terms for U.S. borrowers, even for those without trade exposure. We identify the effect of dollar movements using spread and loan amount adjustments during the syndication process. Using this high-frequency, within loan variation, we find that a one standard deviation increase in the dollar index increases spreads by up to 15 basis points and reduces loan amounts and underpricing by up to 2 percent and 7 basis points, respectively. These effects are concentrated in dollar appreciations. Our results suggest that global factors reflected in the dollar determine U.S. borrowing costs.
Keywords: Loan Pricing; Syndicated Loans; Dollar; Institutional Investors; Risk Taking
JEL Codes: F15; G15; G21; G23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Dollar Index Increase (F31) | Effective Loan Spreads Increase (G19) |
| Dollar Index Increase (F31) | Loan Amount Decrease (G51) |
| Dollar Index Increase (F31) | Underpricing Decrease (D49) |