The Currency Denomination of Trade and Price Discrimination: The Euro after European Union Expansion
AbstractIf a country’s imports are invoiced in a foreign currency then the import prices paid by consumers, and the importing country’s inflation rate, are vulnerable to exchange rate movements. Using a unique multiple market model I exam a representative firm’s currency denomination decision when selling to different countries. The simulation studies the impact of EU expansion on the currency denomination of trade. Results suggest that when preferences are similar across countries EU expansion decreases the likelihood of price discrimination and could decrease the use of the euro as an invoicing currency in the original EU’s imports.
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Bibliographic InfoPaper provided by Department of Economics and Finance, College of Charleston in its series Working Papers with number 3.
Length: 16 pages
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currency invoicing; exchange rate; inflation; EU expansion; price discrimination;
Find related papers by JEL classification:
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- F31 - International Economics - - International Finance - - - Foreign Exchange
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-04-04 (All new papers)
- NEP-CBA-2008-04-04 (Central Banking)
- NEP-EEC-2008-04-04 (European Economics)
- NEP-IFN-2008-04-04 (International Finance)
- NEP-MAC-2008-04-04 (Macroeconomics)
- NEP-MON-2008-04-04 (Monetary Economics)
- NEP-OPM-2008-04-04 (Open Economy Macroeconomic)
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