On the design of invoicing practices in international trade
We advance an explanation for the choice of the invoice currency of international trade contracts on the basis of strategic bargaining considerations. The choice of the invoice currency originates in a situation in which each trader takes into account the other party's bargaining power. The latter depends on the individual discount factor, whether one is the first or second proposer, and whether one is on the short or long side of the market. Along these lines we explain the Grassman bias for trade contracts to be invoiced in the exporter's currency. Copyright Kluwer Academic Publishers 1992
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Volume (Year): 3 (1992)
Issue (Month): 2 (June)
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References listed on IDEAS
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- Ethier, Wilfred, 1973. "International Trade and the Forward Exchange Market," American Economic Review, American Economic Association, vol. 63(3), pages 494-503, June.
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"Equilibrium in a Market with Sequential Bargaining,"
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- Rubinstein, Ariel & Wolinsky, Asher, 1985. "Equilibrium in a Market with Sequential Bargaining," Econometrica, Econometric Society, vol. 53(5), pages 1133-1150, September.
- John Sutton, 1986. "Non-Cooperative Bargaining Theory: An Introduction," Review of Economic Studies, Oxford University Press, vol. 53(5), pages 709-724.
- G. Basevi & D. Cocchi & P. L. Lischi, 1985. "The Choice of Currency in the Foreign Trade of Italy," Working Papers 17, Dipartimento Scienze Economiche, Universita' di Bologna.
- Grassman, Sven, 1973. "A fundamental symmetry in international payment patterns," Journal of International Economics, Elsevier, vol. 3(2), pages 105-116, May.
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