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On the design of invoicing practices in international trade

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Author Info
Jean-Marie Viaene
Casper Vries

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Abstract

We advance an explanation for the choice of the invoice currency of international trade contracts on the basis of strategic bargaining considerations. The choice of the invoice currency originates in a situation in which each trader takes into account the other party's bargaining power. The latter depends on the individual discount factor, whether one is the first or second proposer, and whether one is on the short or long side of the market. Along these lines we explain the Grassman bias for trade contracts to be invoiced in the exporter's currency. Copyright Kluwer Academic Publishers 1992

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File URL: http://hdl.handle.net/10.1007/BF01886200
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Publisher Info
Article provided by Springer in its journal Open Economies Review.

Volume (Year): 3 (1992)
Issue (Month): 2 (June)
Pages: 133-142
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Handle: RePEc:kap:openec:v:3:y:1992:i:2:p:133-142

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Web page: http://www.springerlink.com/link.asp?id=100323

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Related research
Keywords: invoicing; sequential bargaining; Grassman's law;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Ethier, Wilfred, 1973. "International Trade and the Forward Exchange Market," American Economic Review, American Economic Association, vol. 63(3), pages 494-503, June. [Downloadable!] (restricted)
  2. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January. [Downloadable!] (restricted)
  3. Black, Stanley W., 1985. "International money and international monetary arrangements," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 2, chapter 22, pages 1153-1193 Elsevier. [Downloadable!] (restricted)
  4. Giorgio Basevi & Daniela Cocchi & Pier Luigi Lischi, 1985. "The Choice of Currency in the Foreign Trade of Italy," Working Papers 17, Dipartimento Scienze Economiche, Universita' di Bologna.
  5. Sutton, John, 1986. "Non-cooperative Bargaining Theory: An Introduction," Review of Economic Studies, Blackwell Publishing, vol. 53(5), pages 709-24, October. [Downloadable!] (restricted)
  6. Grassman, Sven, 1973. "A fundamental symmetry in international payment patterns," Journal of International Economics, Elsevier, vol. 3(2), pages 105-116, May. [Downloadable!] (restricted)
  7. Rubinstein, Ariel & Wolinsky, Asher, 1985. "Equilibrium in a Market with Sequential Bargaining," Econometrica, Econometric Society, vol. 53(5), pages 1133-50, September. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Brown, M. & Ongena, S. & Yesin, P., 2008. "Currency Denomination of Bank Loans: Evidence from Small Firms in Transition Countries," Discussion Paper 2008-16, Tilburg University, Center for Economic Research. [Downloadable!]
  2. Ligthart, J.E. & Da Silva, J., 2007. "Currency Invoicing in International Trade: A Panel Data Approach," Discussion Paper 2007-25, Tilburg University, Center for Economic Research. [Downloadable!]
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