Invoice Currency Choice in Intra-Firm Trade: A Transaction-Level Analysis of Japanese Automobile Exports

Taiyo Yoshimi, Uraku Yoshimoto, Kiyotaka Sato, Takatoshi Ito, Junko Shimizu and Yushi Yoshida

No 32142, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This study empirically investigates how the invoice currency choice differs between intra-firm and arm’s-length exports. We also examine whether other firm- and product-level characteristics affect the choice of invoice currency. This study is the first to be granted access to highly disaggregated transaction-level trade data for Japan. Focusing on Japanese automobile exports to France, we demonstrate that the importer’s currency tends to be chosen in intra-firm export invoicing based on a panel logit estimation. Our empirical findings remain robust when different types of intra-firm export variables and other conventional explanatory variables are introduced, such as firm and product market share, exchange rate volatility, euro-invoiced imports, labor productivity, and research and development intensity. Given growing intra-firm trade and expanding global value chains, Japanese parent firms tend to invoice in the importers’ currency, assuming the foreign exchange risk that arises from intra-firm trade. Thus, exchange rate risk management is a significant consideration for Japanese parent firms.

JEL-codes: F14 F30 F31 (search for similar items in EconPapers)
Date: 2024-02
New Economics Papers: this item is included in nep-ifn, nep-int, nep-opm and nep-rmg
Note: IFM
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Working Paper: Invoice Currency Choice in Intra-Firm Trade: A Transaction-Level Analysis of Japanese Automobile Exports (2023)
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