Has the Euro Affected the Choice of Invoicing Currency?

Jenny Ligthart and Sebastian E. V. Werner

No 3058, CESifo Working Paper Series from CESifo

Abstract: We present a new approach to study empirically the effect of the introduction of the euro on currency invoicing. Our approach uses a compositional multinomial logit model, in which currency choice depends on the characteristics of both the currency and the country. We use unique quarterly panel data of Norwegian imports from OECD countries for the 1996-2006 period. One of the key findings is that the eurozone countries in trade with Norway have substantially increased their share of home currency invoicing after the introduction of the euro. In addition, the euro as a vehicle currency has overtaken the role of the US dollar in Norwegian imports. The econometric analysis shows a significant effect of euro introduction above and beyond the determinants of currency invoicing (i.e., inflation rate, inflation volatility, foreign exchange market size, and product composition). However, the rise in producer currency invoicing by eurozone countries is primarily caused by a drop in inflation volatility.

Keywords: euro; invoicing currency; exchange rate risk; inflation; inflation risk; vehicle currencies; compositional multinomial logit (search for similar items in EconPapers)
JEL-codes: C25 E31 F14 F15 F31 F33 F36 (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Has the euro affected the choice of invoicing currency? (2012)
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)
Working Paper: Has the Euro Affected the Choice of Invoicing Currency? (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_3058

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