Corporate Dollar Debt and Global Trades

Abstract

We examine how dollar debt and firm heterogeneity influence exchange rate pass-through to global trades. Using Korean firm-level balance sheet and transaction-level customs data, we find that after the 1997 devaluation, small exporters with higher foreign currency debt tend to reduce their export quantities and raise prices. In contrast, for large exporters, higher foreign currency debt results in higher export quantities and lower prices. Financial frictions constrain small firms, limiting production. Large firms face less disruption in production and increase exports to overcome liquidity shortages. Panel data from 2001-2020 further support the balance sheet effect of dollar debt on exports.