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Micro, Macro, and Strategic Forces in International Trade Invoicing

  • Linda S. Goldberg
  • Cédric Tille

The use of different currencies in the invoicing of international trade transactions plays a major role in the international transmission of economic fluctuations. Existing studies argue that an exporter's invoicing choice reflects structural aspects of her industry, such as market share and the price-sensitivity of demand, the hedging of marginal costs, due for instance to the use of imported inputs, and macroeconomic volatility. We use a new highly disaggregated dataset to assess the roles of the various invoicing determinants. We find support for the factors identified in the literature, and document a new feature, in the form of a link between shipments size and invoicing. Specifically, larger transactions are more likely to be invoiced in the importer's currency. We offer a potential theoretical explanation for the empirical link between transaction size and invoicing by allowing invoicing to be set through a bargaining between exporters and importers, a feature that is absent from existing models despite its empirical relevance.

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File URL: http://www.nber.org/papers/w15470.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15470.

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Date of creation: Nov 2009
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Handle: RePEc:nbr:nberwo:15470
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  1. Bacchetta, Philippe & Van Wincoop, Eric, 2002. "A theory of the currency denomination of international trade," Working Paper Series 0177, European Central Bank.
  2. James E. Rauch, 1996. "Networks versus Markets in International Trade," NBER Working Papers 5617, National Bureau of Economic Research, Inc.
  3. Novy, Dennis, 2006. "Hedge Your Costs: Exchange Rate Risk and Endogenous Currency Invoicing," The Warwick Economics Research Paper Series (TWERPS) 765, University of Warwick, Department of Economics.
  4. Gita Gopinath & Oleg Itskhoki & Roberto Rigobon, 2007. "Currency Choice and Exchange Rate Pass-through," NBER Working Papers 13432, National Bureau of Economic Research, Inc.
  5. Jean-Marie Viaene & Casper Vries, 1992. "On the design of invoicing practices in international trade," Open Economies Review, Springer, vol. 3(2), pages 133-142, June.
  6. Linda S. Goldberg & Cedric Tille, 2005. "Vehicle Currency Use in International Trade," NBER Working Papers 11127, National Bureau of Economic Research, Inc.
  7. Friberg, Richard, 1998. "In which currency should exporters set their prices?," Journal of International Economics, Elsevier, vol. 45(1), pages 59-76, June.
  8. 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.
  9. 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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