Global Dollar Credit and Carry Trades: A Firm-Level Analysis

We conduct a firm-level analysis of borrowing in US dollars by nonfinancial corporates from outside the United States. We find that emerging market firms with already high cash holdings are more likely to issue US dollar-denominated bonds, especially during periods when the dollar carry trade is more favorable. The proceeds of the dollar bond issuance add to the firm's cash holdings more than other sources of funds. The evidence points to financial decisions that resemble carry trades, rather than to precautionary borrowing in anticipation of future financing needs.