Foreign Currency Debt and Disagreement

Dados Bibliográficos

ID9714908
AutoresKenza Benhima (0000-0002-7765-3398, HEC Lausanne, University of Lausanne, Switzerland & CEPR), Isabella Blengini (0000-0001-7556-3666, EHL Hospitality Business School, HES-SO University of Applied Sciences and Arts Western Switzerland), Ouarda Merrouche (University Paris Nanterre & EconomiX UMR CNRS)
Ano2025
Data de publicação2025-08-27
Peer ReviewedSim
Open AccessSim
TipoARTICLE
PeriódicoThe Economic Journal (JOURNAL)
Identificadores do periódicoISSN: 0013-0133 • E-ISSN: 1468-0297
EditoraOxford University Press (PUBLISHER • GB)
DOI10.1093/ej/ueaf076
OpenAlexW4413761140
IdiomaEN
Referências citadas59

This paper highlights the disagreement channel of corporate foreign currency borrowing. In our model, if domestic agents have better information than foreign lenders on the state of the economy, foreign currency borrowing might arise if the fundamentals are strong relative to what public signals suggest to foreigners. In these situations, international markets overestimate future currency depreciation, which increases the cost of borrowing in domestic currency. Domestic agents then borrow more in foreign currency because they disagree with international lenders’ pessimistic assessment. This mechanism is consistent with the data: empirically, we show that, controlling for fundamentals, negative public signals are associated with positive domestic currency excess returns and with more foreign currency borrowing

Currency · Debt · Economics · External debt · International economics · Macroeconomics · Monetary economics · European Monetary and Fiscal Policies · Global Financial Crisis and Policies