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U.S. Dollar Dominance and the Role of Local Currency Settlement Framework: Evidence from Thai Exports

Author

Listed:
  • Mintrapan Chaeng-lum
  • Nuwat Nookhwun
  • Jettawat Pattararangrong

Abstract

This paper examines factors behind the persistence of dominant currency pricing and the effectiveness of de-dollarization policies in the context of emerging market economies. Using a transaction-level customs dataset of Thailand spanning 2007–2024, we document the dominance of dollar invoicing in Thai export transactions, despite a gradual rise in baht invoicing. Such dollar dominance is largely explained by firm and industry characteristics, including imported input exposure, strategic complementarities and inertia in invoicing currency choice. Meanwhile, the introduction of the Local Currency Settlement Framework (LCSF) between Thailand and partner countries including Malaysia and Indonesia moderately reduces dollar reliance, with effects being heterogeneous across firms and industries. Notably, we find that dollar-denominated liabilities do not influence invoicing choice, suggesting some disconnection between operational and financial hedging.

Suggested Citation

  • Mintrapan Chaeng-lum & Nuwat Nookhwun & Jettawat Pattararangrong, 2026. "U.S. Dollar Dominance and the Role of Local Currency Settlement Framework: Evidence from Thai Exports," PIER Discussion Papers 250, Puey Ungphakorn Institute for Economic Research.
    • Handle: RePEc:pui:dpaper:250
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    References listed on IDEAS

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    1. Victor Lyonnet & Julien Martin & Isabelle Mejean, 2022. "Invoicing Currency and Financial Hedging," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 54(8), pages 2411-2444, December.
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    3. Kazunobu Hayakawa & Nuttawut LAKSANAPANYAKUL & Toshiyuki Matsuura & Taiyo Yoshimi, 2024. "Export Dynamics and Invoicing Currency," Keio-IES Discussion Paper Series 2024-005, Institute for Economics Studies, Keio University.
    4. Chalongphob Sussangkarn, 2020. "Promoting Local Currency Usage in the Region," Asian Economic Papers, MIT Press, vol. 19(2), pages 1-16, Summer.
    5. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 7-35, June.
    6. Nuwat Nookhwun & Jettawat Pattararangrong & Phurichai Rungcharoenkitkul, 2025. "Exchange Rate Effects on Firm Performance: A NICER Approach," PIER Discussion Papers 233, Puey Ungphakorn Institute for Economic Research.
    7. Chung, Wanyu, 2016. "Imported inputs and invoicing currency choice: Theory and evidence from UK transaction data," Journal of International Economics, Elsevier, vol. 99(C), pages 237-250.
    8. Kwang Myoung Hwang & Kyungmin Kim & Chung Seak Roh & Mijin Kim, 2019. "Analysis on the determinants of currency invoicing in Korean trade," The World Economy, Wiley Blackwell, vol. 42(3), pages 876-900, March.
    9. Devereux, Michael B. & Engel, Charles & Storgaard, Peter E., 2004. "Endogenous exchange rate pass-through when nominal prices are set in advance," Journal of International Economics, Elsevier, vol. 63(2), pages 263-291, July.
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    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F3 - International Economics - - International Finance

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