Has the euro affected the choice of invoicing currency?

Jenny Ligthart and Sebastian E.V. Werner

Journal of International Money and Finance, 2012, vol. 31, issue 6, 1551-1573

Abstract: We present a new approach to study empirically the effect of the introduction of the euro on the pattern of currency invoicing. Our approach uses a compositional multinomial logit model, in which currency choice is explained by both currency-specific and country-specific determinants. We use unique quarterly panel data on the invoicing of Norwegian imports from OECD countries for the 1996–2006 period. We find that eurozone countries have substantially increased their share of home currency invoicing after the introduction of the euro, whereas the home currency share of non-eurozone countries fell slightly. In addition, the euro as a vehicle currency has overtaken the role of the US dollar in Norwegian imports. The substantial rise in producer currency invoicing by eurozone countries is primarily caused by a drop in inflation volatility and can only to a small extent be explained by an unobserved euro effect.

Keywords: Euro; Invoicing currency; Exchange rate risk; Inflation volatility; Vehicle currencies; Compositional multinomial logit (search for similar items in EconPapers)
JEL-codes: C25 E31 F33 F41 F42 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (8)

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Related works:
Working Paper: Has the Euro affected the choice of invoicing currency? (2012)
Working Paper: Has the Euro Affected the Choice of Invoicing Currency? (2011)
Working Paper: Has the Euro Affected the Choice of Invoicing Currency? (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:31:y:2012:i:6:p:1551-1573

DOI: 10.1016/j.jimonfin.2012.02.015

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