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Currency Invoicing in International Trade : A Panel Data Approach

Author

Listed:
  • Ligthart, J.E.

    (Tilburg University, Center For Economic Research)

  • Da Silva, J.

Abstract

The paper empirically investigates the determinants of currency invoicing in Dutch goods trade with OECD countries. To this end, a currency-share systems approach is employed, which is applied to quarterly panel data for 1987–1998. One of the key findings is that a country’s share of producer currency pricing falls if demand in the foreign export market falls. In addition, we find that the better developed the partner country’s banking sector and the larger its share in world trade, the lower is the share of Dutch guilder invoicing. A higher expected rate of inflation in the partner country increases Dutch guilder invoicing. The depth of the foreign exchange market of a currency, a country’s share in world trade, and a country being part of the European Union are key determinants of vehicle currency use.

Suggested Citation

  • Ligthart, J.E. & Da Silva, J., 2007. "Currency Invoicing in International Trade : A Panel Data Approach," Discussion Paper 2007-25, Tilburg University, Center for Economic Research.
  • Handle: RePEc:tiu:tiucen:861fb576-0ae9-4da6-9589-2e56b8dd094e
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    File URL: https://pure.uvt.nl/ws/portalfiles/portal/825334/dp2007-25.pdf
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    References listed on IDEAS

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    Cited by:

    1. Ligthart, Jenny E. & Werner, Sebastian E.V., 2012. "Has the euro affected the choice of invoicing currency?," Journal of International Money and Finance, Elsevier, vol. 31(6), pages 1551-1573.
    2. Olivier de Bandt & Tovonony Razafindrabe, 2014. "Exchange rate pass-through to import prices in the Euro-area: A multi-currency investigation," International Economics, CEPII research center, issue 138, pages 63-77.
    3. ITO Takatoshi & KOIBUCHI Satoshi & SATO Kiyotaka & SHIMIZU Junko, 2016. "Choice of Invoice Currency in Japanese Trade: Industry and commodity level analysis," Discussion papers 16031, Research Institute of Economy, Trade and Industry (RIETI).

    More about this item

    Keywords

    invoicing currency; Grassman’s law; exchange rate risk; local currency pricing; producer currency pricing; vehicle currencies;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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