Macro/Trade Economics Seminar presented by:

Galina B. Hale (Federal Reserve Bank of San Francisco)

Co-authors:

Peter Jones (University of California, Berkeley)

Mark M. Spiegel (Federal Reserve Bank of San Francisco)

Abstract:

We examine currency denomination in a large sample of private international bonds issued by small country firms. We find a substantive and persistent increase in the share of international bond placements denominated in issuers’ home currencies, potentially mitigating currency mismatch. This trend appears to have accelerated since the global financial crisis. We find that global financial conditions as well as issuers’ country inflation history determine the change in home currency issuance. We present a model illustrating how temporary changes in relative currency-denomination costs can lead to persistent changes in currency composition of bond issuance.