Invoice Currency Choice in Intra-Firm Trade: A Transaction-Level Analysis of Japanese Automobile Exports

Taiyo Yoshimi, Uraku Yoshimoto, Kiyotaka Sato, Takatoshi Ito, Junko Shimizu and Yushi Yoshida
Additional contact information
Taiyo Yoshimi: Faculty of Economics, Chuo University, Japan / Policy Research Institute, Ministry of Finance, Japan
Uraku Yoshimoto: Policy Research Institute, Ministry of Finance, Japan
Kiyotaka Sato: Faculty of International Social Sciences, Yokohama National University, Japan / Policy Research Institute, Ministry of Finance, Japan
Takatoshi Ito: School of International Relations and Public Policy, Columbia University, The United States / National Graduate Institute for Policy Studies, Japan
Junko Shimizu: Faculty of Economics, Gakushuin University, Japan / Policy Research Institute, Ministry of Finance, Japan

Discussion papers from Policy Research Institute, Ministry of Finance Japan

Abstract: This study empirically investigates the extent to which the choice of invoice currency differs between intra-firm and arm fs length exports. We also examine whether other firm- and product-level factors affect the choice of invoice currency. This study is the first to be granted access to highly disaggregated transaction-level data on Japanese automobile exports to France. By conducting panel logit estimation, we demonstrate that importers f currency tends to be chosen in intra-firm export invoicing, which has not been rigorously shown in previous literature. Our empirical findings remain robust when introducing different types of intra-firm export variables and other conventional explanatory variables such as firm- and product market share, exchange rate volatility, a dummy for intermediate goods exports, euro-invoiced imports, labor productivity, and research and development intensity. Amid growing intra-firm trade and expanding global value chains, Japanese parent firms tend to invoice using the importer fs currency, assuming the foreign exchange risk that arises from intra-firm trade; thus, exchange rate risk management is a significant consideration for Japanese parent firms.

Keywords: Invoice currency; Intra-firm trade; Japan Customs data; Market share; Export competitiveness (search for similar items in EconPapers)
JEL-codes: F14 F31 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2023-09
New Economics Papers: this item is included in nep-int and nep-mon
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https://www.mof.go.jp/pri/research/discussion_paper/ron353.pdf First version, 2016 (application/pdf)

Related works:
Working Paper: Invoice Currency Choice in Intra-Firm Trade: A Transaction-Level Analysis of Japanese Automobile Exports (2024)
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