Working Paper: NBER ID: w31891
Authors: Matteo Maggiori; Brent Neiman; Jesse Schreger
Abstract: We explore the consequences of global capital market segmentation by currency for the optimal currency composition of borrowing by firms. Global bond portfolios are driven by the currency of denomination of assets as investors prefer to lend in their home currency or the international currency, the US Dollar. Larger and more productive firms select into foreign currency issuance. International segmentation results in a quantity-dimension of the exorbitant privilege whereby US firms that only issue in the domestic currency benefit from being able to more easily borrow from global investors.
Keywords: Corporate Debt; Currency Bias; Global Capital Markets
JEL Codes: F3; G15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Currency of denomination (E42) | Investment behavior of global investors (G11) |
| Firm size (L25) | Likelihood of issuing in multiple currencies (F31) |
| Endogenous productivity threshold (O49) | Firm size (L25) |
| Smaller, less productive firms (D21) | Currency choice (F31) |