weaker US dollar means more USD credit issuance abroad - here's why

weaker US dollar means more USD credit issuance abroad - here's why foreign banks frequently borrow USD through wholesale markets with a local currency denominated collateral when USD depreciates against a local currency, offshore USD credit now has a reduced debt service

bank's leverage ratios improve due to collateral appreciation, thus allowing them to borrow more USD collateral here is the non-USD local currency, such as Yuan

so a weaker US dollar tends to increase global USD liquidity in the SVAR, one standard deviation of US dollar's appreciation leads to a fall in cross-border USD lending. it reaches its bottom after 6 months and then eventually recovers after 2.5 years if no new shocks arrive