Post by Sapphire Capital on Dec 18, 2008 21:50:01 GMT 4
Foreign-Currency Bonds: Currency Choice and the Role of Uncovered and Covered Interest Parity
Maurizio Michael Habib
European Central Bank (ECB)
Mark Joy
University of Glasgow - Department of Economics
October 14, 2008
ECB Working Paper No. 947
Abstract:
Using count-data techniques, this paper studies the determinants of currency choice in the issuance of foreign-currency-denominated bonds. In particular, we investigate whether bond issuers choose their issuance currency in order to exploit the borrowing-cost savings associated with deviations from uncovered and covered interest parity. Our sample includes issuers from both the public sector and private sector. Our findings show that the choice of issuance currency is sensitive to deviations from uncovered interest parity but insensitive, in general, to deviations from covered interest parity. Furthermore, the influence of deviations from uncovered interest parity is stronger for financial issuers than for nonfinancial issuers.
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1275832_code485639.pdf?abstractid=1275832&mirid=1
Maurizio Michael Habib
European Central Bank (ECB)
Mark Joy
University of Glasgow - Department of Economics
October 14, 2008
ECB Working Paper No. 947
Abstract:
Using count-data techniques, this paper studies the determinants of currency choice in the issuance of foreign-currency-denominated bonds. In particular, we investigate whether bond issuers choose their issuance currency in order to exploit the borrowing-cost savings associated with deviations from uncovered and covered interest parity. Our sample includes issuers from both the public sector and private sector. Our findings show that the choice of issuance currency is sensitive to deviations from uncovered interest parity but insensitive, in general, to deviations from covered interest parity. Furthermore, the influence of deviations from uncovered interest parity is stronger for financial issuers than for nonfinancial issuers.
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1275832_code485639.pdf?abstractid=1275832&mirid=1