The Sticky Leverage Channel of Monetary Policy: Evidence from Dollar-Denominated Debt in Latin America by Guojun Chen, Jinyu Liu, Shaowen Luo published by Journal of Economic Dynamics & Control (9/2025).
This paper investigates the sticky leverage channel of monetary policy transmission. When debt obligations have fixed nominal value in foreign currency, a foreign monetary expansion reduces the burden of existing debt measured in local currency and boosts firm performance. Using data on Mexican and Brazilian publicly listed firms with substantial dollar-denominated debt, we show that firms with higher dollar leverage experience greater increases in equity value, capital expenditure, and sales following a U.S. monetary expansion. These effects are more pronounced for firms with longer debt maturities or larger net export positions.
