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The currency denomination of external European Union imports after European Union expansion


  • Witte, Mark David


Using a multiple market model I examine the impact of euro expansion on the optimal currency denomination of external EU imports. Results suggest euro invoicing will increase more in the EU-expansion country than in the original EU. Exporting firms from dollar bloc countries (the U.S. or countries with fixed exchange rates with the dollar) are more likely to invoice in the euro if price discrimination is already optimal. Firms from outside the dollar bloc are more likely to use the euro when the original EU market is relatively large or transaction costs of exchanging the euro are relatively small.

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  • Witte, Mark David, 2009. "The currency denomination of external European Union imports after European Union expansion," Economic Systems, Elsevier, vol. 33(3), pages 245-258, September.
  • Handle: RePEc:eee:ecosys:v:33:y:2009:i:3:p:245-258

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    References listed on IDEAS

    1. Black, Stanley W., 1991. "Transactions costs and vehicle currencies," Journal of International Money and Finance, Elsevier, vol. 10(4), pages 512-526, December.
    2. 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.
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    7. Taylor, John B., 2000. "Low inflation, pass-through, and the pricing power of firms," European Economic Review, Elsevier, vol. 44(7), pages 1389-1408, June.
    8. Richard Friberg, 2003. "Common Currency, Common Market?," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 650-661, 04/05.
    9. Mario J. Crucini & Chris I. Telmer & Marios Zachariadis, 2005. "Understanding European Real Exchange Rates," American Economic Review, American Economic Association, vol. 95(3), pages 724-738, June.
    10. Friberg, Richard, 1998. "In which currency should exporters set their prices?," Journal of International Economics, Elsevier, vol. 45(1), pages 59-76, June.
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