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Has the Euro affected the choice of invoicing currency?

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  • Ligthart, Jenny E.
  • Werner, Sebastian E. V.

Abstract

We present a new approach to study empirically the effect of the introduction of the euro on the pattern of currency invoicing. Our approach uses a compositional multinomial logit model, in which currency choice is explained by both currency-specific and country-specific determinants. We use unique quarterly panel data on the invoicing of Norwegian imports from OECD countries for the 1996-2006 period. We find that eurozone countries have substantially increased their share of home currency invoicing after the introduction of the euro, whereas the home currency share of non-eurozone countries fell slightly. In addition, the euro as a vehicle currency has overtaken the role of the US dollar in Norwegian imports. The substantial rise in producer currency invoicing by eurozone countries is primarily caused by a drop in inflation volatility and can only to a small extent be explained by an unobserved euro effect. JEL Classification: F33, F41, F42, E31, C25

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Paper provided by European Central Bank in its series Working Paper Series with number 1414.

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Date of creation: Jan 2012
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Handle: RePEc:ecb:ecbwps:20121414

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

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Cited by:
  1. Jenny Ligthart & Sebastian E. V. Werner, 2010. "Has the Euro Affected the Choice of Invoicing Currency?," CESifo Working Paper Series 3058, CESifo Group Munich.
  2. Straume, Hans-Martin, 2013. "Currency invoicing in Norwegian salmon export," Working Papers in Economics 11/13, University of Bergen, Department of Economics.
  3. Ke Pang & Yao Tang, 2014. "Vertical Trade, Exchange Rate Pass-Through, and the Exchange Rate Regime," Open Economies Review, Springer, vol. 25(3), pages 477-520, July.

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