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Has the Euro Affected the Choice of Invoicing Currency?

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  • Jenny E. Ligthart

    ()

  • Sebastian E. V. Werner

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 multi- nomial logit model, in which currency choice is explained by both currency-specific and country-specific determinants. We use unique quarterly panel data 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. 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.

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File URL: http://cama.crawford.anu.edu.au/pdf/working-papers/2011/032011.pdf
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Bibliographic Info

Paper provided by Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University in its series CAMA Working Papers with number 2011-03.

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Length: 42 pages
Date of creation: Feb 2011
Date of revision:
Handle: RePEc:een:camaaa:2011-03

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Citations

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Cited by:
  1. Ligthart, Jenny E. & Werner, Sebastian E.V., 2012. "Has the euro affected the choice of invoicing currency?," Journal of International Money and Finance, Elsevier, vol. 31(6), pages 1551-1573.
  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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