Imported Inputs and Invoicing Currency Choice: Theory and Evidence from UK Transaction Data

Wanyu Chung

No 2014-11, Discussion Papers from University of Nottingham, GEP

Abstract: What determines the currency denomination of international trade? This is the first paper to consider in theory and data how exporters' dependence on imported inputs affects their choice of invoicing currency. My model predicts that exporters more dependent on foreign currency-denominated inputs are more likely to use foreign currency for pricing. Using a novel dataset that covers all UK trade transactions with non-EU countries, I provide firm-level evidence by matching import and export data and relate exporters' invoicing currency choice to their import behavior. I find considerable support for the model's predictions, and these findings have strong implications for the variation of exchange rate pass-through across industries.

Keywords: Invoicing Currency; Exchange Rate Pass-through; Trade in Intermediate Goods (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-int, nep-mon and nep-opm
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Citations: View citations in EconPapers (21)

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Journal Article: Imported inputs and invoicing currency choice: Theory and evidence from UK transaction data (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:not:notgep:14/11

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