The Choice of Invoice Currency under Uncertainty: A View on "Internationalization of Yen" in East Asia(in Japanese)

Masanori Ono and Shin-ichi Fukuda ()

ESRI Discussion paper series from Economic and Social Research Institute (ESRI)

Abstract: The purpose of this paper is to investigate the choice of invoice currency under exchange rate uncertainty. The analysis is motivated by the fact that the U.S. dollar has been the dominant vehicle currency in developing countries. The theoretical analysis is based on an open economy model of monopolistic competition. The export prices are set before exchange rates are known. When the market is competitive enough, the exporting firms tend to set their prices not to deviate from those of the competitors. As a result, when the other exporters set their prices in the third currency, the exporting firm tends to choose the third currency as the invoice currency. The tendency becomes conspicuous in the market where the shares of local firms are small. The latter part of the paper empirically investigates the relevancy of the theoretical results by using the export price data in Korea. We find that export prices in Korea are highly stable in terms of the US dollar even in the commodities for which Japan has had dominant shares. We also find that export prices in Korea are more stable against the US dollar in the commodities for which the shares of local firms are small. The empirical results are consistent with our theoretical model. The result may explain why the firm tends to set prices in the US dollar even if the United States is not a trade partner.

Pages: 38 pages
Date: 2004-02
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.esri.go.jp/jp/archive/e_dis/e_dis086/e_dis086a.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to www.esri.go.jp:80 (No such host is known. )

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:esj:esridp:086

Access Statistics for this paper

More papers in ESRI Discussion paper series from Economic and Social Research Institute (ESRI) Contact information at EDIRC.
Bibliographic data for series maintained by HORI nobuko ( this e-mail address is bad, please contact ).