Micro, Macro, and Strategic Forces in International Trade Invoicing

Linda Goldberg and Cédric Tille

No 82010, Working Papers from Hong Kong Institute for Monetary Research

Abstract: 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.

Keywords: Invoicing Currency; Vehicle Currency; Pass-Through; International Trade (search for similar items in EconPapers)
JEL-codes: F3 F4 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2010-04
New Economics Papers: this item is included in nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Micro, Macro, and Strategic Forces in International Trade Invoicing (2009)
Working Paper: Micro, macro, and strategic forces in international trade invoicing (2009)
Working Paper: Micro, Macro, and Strategic Forces in International Trade Invoicing (2009)
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