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Determinants of Currency Invoicing in Japanese Exports: A firm-level analysis

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  • ITO Takatoshi
  • KOIBUCHI Satoshi
  • SATO Kiyotaka
  • SHIMIZU Junko

Abstract

Currency invoicing in Japanese exports has two puzzling patterns concerning an excessively small share of yen invoicing: one is a strong tendency of Japanese firms to choose the importer's currency invoicing in exports to developed countries, and the other is the prevalence of U.S. dollar invoicing in Japanese exports to East Asia even though Japanese firms have built a regional production network over two decades. To address the puzzles, we propose new possible determinants of currency invoicing at a firm-level, based on an interview analysis with Japanese representative exporting firms, and then empirically test them by probit estimation using the unique dataset on the firms' currency invoicing choice by destination. Our novel findings suggest that a surprisingly low share of yen invoicing in Japanese exports even in the 2000s is attributed not only to the growing intra-firm trade through active overseas operations of Japanese firms but also to the unique production/trade structure in Asia mainly established by Japanese electronics companies.

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Bibliographic Info

Paper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 10034.

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Length: 40 pages
Date of creation: Jun 2010
Date of revision:
Handle: RePEc:eti:dpaper:10034

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  1. Bacchetta, Philippe & van Wincoop, Eric, 2005. "A theory of the currency denomination of international trade," Journal of International Economics, Elsevier, vol. 67(2), pages 295-319, December.
  2. Ligthart, J.E. & Da Silva, J., 2007. "Currency Invoicing in International Trade: A Panel Data Approach," Discussion Paper, Tilburg University, Center for Economic Research 2007-25, Tilburg University, Center for Economic Research.
  3. Shabtai Donnenfeld & Alfred A. Haug, 2008. "Currency invoicing of US imports," International Journal of Finance & Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 13(2), pages 184-198.
  4. Donnenfeld, S. & Zilcha, I., 1989. "Pricing Of Exports And Exchange Rate Uncertainty," Papers, Tel Aviv 12-89, Tel Aviv.
  5. Shin-ichi Fukuda & Ji Cong, 1994. "On the Choice of Invoice Currency by Japanese Exporters: The PTM Approach," Discussion Paper Series, Institute of Economic Research, Hitotsubashi University a289, Institute of Economic Research, Hitotsubashi University.
  6. Johnson, Martin & Pick, Daniel, 1997. "Currency Quandary: The Choice of Invoicing Currency under Exchange-Rate Uncertainty," Review of International Economics, Wiley Blackwell, vol. 5(1), pages 118-28, February.
  7. Yushi Yoshida & Shinji Takagi, 1999. "Exchange Rate Movements and Tradable Goods Prices in East Asia," IMF Working Papers 99/31, International Monetary Fund.
  8. Marcus Noland, 1995. "China and the International Economic System," Working Paper Series, Peterson Institute for International Economics WP95-6, Peterson Institute for International Economics.
  9. Friberg, Richard, 1998. "In which currency should exporters set their prices?," Journal of International Economics, Elsevier, vol. 45(1), pages 59-76, June.
  10. George S. Tavlas, 1997. "The International Use of the US Dollar: An Optimum Currency Area Perspective," The World Economy, Wiley Blackwell, vol. 20(6), pages 709-747, 09.
  11. Sven W. Arndt & J. David Richardson, 1987. "Real-Financial Linkages Among Open Economies," NBER Working Papers 2230, National Bureau of Economic Research, Inc.
  12. Yusuru Ozeki & George S. Tavlas, 1992. "The Internationalization of Currencies," IMF Occasional Papers 90, International Monetary Fund.
  13. John F. O. Bilson & Richard C. Marston, 1984. "Exchange Rate Theory and Practice," NBER Books, National Bureau of Economic Research, Inc, number bils84-1.
  14. Friberg, Richard & Wilander, Fredrik, 2008. "The currency denomination of exports -- A questionnaire study," Journal of International Economics, Elsevier, vol. 75(1), pages 54-69, May.
  15. Shabtai Donnenfeld & Alfred Haug, 2003. "Currency Invoicing in International Trade: an Empirical Investigation," Review of International Economics, Wiley Blackwell, vol. 11(2), pages 332-345, 05.
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  1. Japan’s rising yen and the decline of the US dollar
    by Masaya Sakuragawa in East Asia Forum on 2011-10-01 12:00:26

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