The Currency Denomination of Trade and Price Discrimination: The Euro after European Union Expansion

Mark Witte

No 3, Working Papers from Department of Economics and Finance, College of Charleston

Abstract: If a country’s imports are invoiced in a foreign currency then the import prices paid by consumers, and the importing country’s inflation rate, are vulnerable to exchange rate movements. Using a unique multiple market model I exam a representative firm’s currency denomination decision when selling to different countries. The simulation studies the impact of EU expansion on the currency denomination of trade. Results suggest that when preferences are similar across countries EU expansion decreases the likelihood of price discrimination and could decrease the use of the euro as an invoicing currency in the original EU’s imports.

Keywords: currency invoicing; exchange rate; inflation; EU expansion; price discrimination (search for similar items in EconPapers)
JEL-codes: F14 F31 (search for similar items in EconPapers)
Pages: 16 pages
New Economics Papers: this item is included in nep-cba, nep-eec, nep-ifn, nep-mac, nep-mon and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:coc:wpaper:3

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