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Has the Euro Affected the Choice of Invoicing Currency?

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Author Info

  • Ligthart, J.E.
  • Werner, S.E.V.

    (Tilburg University, Center for Economic Research)

Abstract

We present a new approach to study empirically the effect of the introduction of the euro on currency invoicing. Our approach uses a compositional multinomial logit model, in which currency choice depends on the characteristics of both the currency and the country. We use unique quarterly panel data of Norwegian imports from OECD countries for the 1996{2006 period. One of the key findings is that the eurozone countries in trade with Norway have substantially increased their share of home currency invoicing after the introduction of the euro. In addition, the euro as a vehicle currency has overtaken the role of the US dollar in Norwegian imports. The econometric analysis shows a significant effect of euro introduction above and beyond the determinants of currency invoicing (i.e., ination rate, ination volatility, foreign exchange market size, and product composition). However, the rise in producer currency invoicing by eurozone countries is primarily caused by a drop in ination volatility.

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Bibliographic Info

Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2010-48.

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Date of creation: 2010
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Handle: RePEc:dgr:kubcen:201048

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

Related research

Keywords: euro; invoicing currency; exchange rate risk; ination; ination risk; vehicle currencies; compositional multinomial logit;

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References

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Cited by:
  1. Ligthart, J.E. & Werner, S.E.V., 2010. "Has the Euro Affected the Choice of Invoicing Currency?," Discussion Paper 2010-48, Tilburg University, Center for Economic Research.
  2. Straume, Hans-Martin, 2013. "Currency invoicing in Norwegian salmon export," Working Papers in Economics 11/13, University of Bergen, Department of Economics.

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