Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/316891 
Year of Publication: 
2025
Series/Report no.: 
CESifo Working Paper No. 11777
Publisher: 
CESifo GmbH, Munich
Abstract: 
This paper documents a new dollar channel that transmits monetary policy across borders. Exploiting unique features of the syndicated loan market for identification, we show that changes in the euro-dollar exchange rate around ECB monetary policy announcements that are orthogonal to simultaneous changes in euro-area interest rates and stock prices affect U.S. leveraged loan spreads. Specifically, in response to dollar appreciation, investors require higher compensation for risk, and borrowing costs for U.S. firms increase. These findings imply a causal link between the U.S. dollar and investors' risk appetite.
Subjects: 
loan pricing
monetary policy spillovers
dollar
institutional investors
risk taking
JEL: 
F15
G15
G21
G23
Document Type: 
Working Paper
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