The Choice of Invoicing Currency in Merchandise Trade

S.A.B. Page

National Institute Economic Review, 1981, vol. 98, 60-72

Abstract: If an exporter or importer uses a foreign currency, his income or costs will be immediately affected when the exchange rate changes; if he uses his own, there will be no effect on contracts that are already fixed. Analysing the pattern of invoicing throws light on what objectives are important in firms' decisions, and in particular on their attitudes toward foreign exchange risk. At the aggregate level, their choice of currency influences the effect of an exchange rate change on a country's balance of trade.

Date: 1981
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