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Currency Invoicing in International Trade: A Panel Data Approach

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Author Info

  • Ligthart, J.E.
  • Da Silva, J.

    (Tilburg University, Center for Economic Research)

Abstract

The paper empirically investigates the determinants of currency invoicing in Dutch goods trade with OECD countries. To this end, a currency-share systems approach is employed, which is applied to quarterly panel data for 1987–1998. One of the key findings is that a country’s share of producer currency pricing falls if demand in the foreign export market falls. In addition, we find that the better developed the partner country’s banking sector and the larger its share in world trade, the lower is the share of Dutch guilder invoicing. A higher expected rate of inflation in the partner country increases Dutch guilder invoicing. The depth of the foreign exchange market of a currency, a country’s share in world trade, and a country being part of the European Union are key determinants of vehicle currency use.

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Bibliographic Info

Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2007-25.

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Date of creation: 2007
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Handle: RePEc:dgr:kubcen:200725

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Web page: http://center.uvt.nl

Related research

Keywords: invoicing currency; Grassman’s law; exchange rate risk; local currency pricing; producer currency pricing; vehicle currencies;

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References

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  1. Linda S. Goldberg & Cedric Tille, 2005. "Vehicle currency use in international trade," Staff Reports 200, Federal Reserve Bank of New York.
  2. Rey, Helene, 2001. "International Trade and Currency Exchange," Review of Economic Studies, Wiley Blackwell, vol. 68(2), pages 443-64, April.
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Citations

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Cited by:
  1. Olivier de Bandt & Tovonony Razafindrabe, 2012. "Exchange rate pass-through to import prices in the Euro-area: a multicurrency investigation," EconomiX Working Papers 2012-32, University of Paris West - Nanterre la Défense, EconomiX.
  2. ITO Takatoshi & KOIBUCHI Satoshi & SATO Kiyotaka & SHIMIZU Junko, 2010. "Determinants of Currency Invoicing in Japanese Exports: A firm-level analysis," Discussion papers 10034, Research Institute of Economy, Trade and Industry (RIETI).
  3. Jenny E. Ligthart & Sebastian E. V. Werner, 2011. "Has the Euro Affected the Choice of Invoicing Currency?," CAMA Working Papers 2011-03, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  4. Takatoshi Ito & Satoshi Koibuchi & Kiyotaka Sato & Junko Shimizu, 2010. "Why has the yen failed to become a dominant invoicing currency in Asia? A firm-level analysis of Japanese Exporters' invoicing behavior," NBER Working Papers 16231, National Bureau of Economic Research, Inc.

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