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Invoicing currency and exchange rate transmission in Korea's export

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  • Kim, Junhyong

Abstract

Using highly disaggregated Korean micro-level trade data, this paper examines the determinants of invoicing currencies and their implications. We find that the determinants of exchange-rate pass-through - intermediated imported inputs, market share, and foreign currency liability - play an important role in shaping currency invoicing decisions. Invoicing choices also exhibit strong persistence over time and strategic complementarity. Demand elasticity further amplifies strategic complementarity. Moreover, exchange-rate pass-through differs markedly across invoicing currencies, with important implications for real economic allocations. The findings here are highly relevant for policymakers in small open economies that do not issue vehicle currencies yet face pervasive dominant-currency pricing.

Suggested Citation

  • Kim, Junhyong, 2026. "Invoicing currency and exchange rate transmission in Korea's export," KDI Journal of Economic Policy, Korea Development Institute (KDI), vol. 48(3), pages 1-24.
    • Handle: RePEc:zbw:kdijep:344134
    DOI: 10.23895/KDIJEP.2026.48.3.1
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    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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