The accession countries to the euro area are increasingly binding their economic activity, external and internal, to the euro area countries. One aspect of this phenomenon concerns the currency invoicing of international trade transactions, where accession countries have reduced their use of the US dollar in invoicing international trade transactions. Theory predicts that the optimal invoicing choices for accession countries depend on the composition of goods in exports and imports and on the macroeconomic fluctuations of trade partners, both bearing on the role of herding and hedging considerations within exporter profitability. These considerations yield country-specific estimates about the degree of euro-denominated invoicing of exports. I find that the exporters of some accession countries, even in their trade transactions with the euro zone and other European Union countries, might be pricing too much of their trade in euros rather than in dollars, thus taking on excessive risk in international markets.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
11653.
Length: Date of creation: Oct 2005 Date of revision: Publication status: published relationship to a non-chapter. This should not happen. Please contact NBER. Handle: RePEc:nbr:nberwo:11653
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Find related papers by JEL classification: F3 - International Economics - - International Finance F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
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