U.S. Dollar Dominance and the Role of Local Currency Settlement Framework: Evidence from Thai Exports

Mintrapan Chaeng-lum, Nuwat Nookhwun and Jettawat Pattararangrong

No 250, PIER Discussion Papers from Puey Ungphakorn Institute for Economic Research

Abstract: This paper examines factors behind the persistence of dominant currency pricing and the effectiveness of de-dollarization policies in the context of emerging market economies. Using a transaction-level customs dataset of Thailand spanning 2007–2024, we document the dominance of dollar invoicing in Thai export transactions, despite a gradual rise in baht invoicing. Such dollar dominance is largely explained by firm and industry characteristics, including imported input exposure, strategic complementarities and inertia in invoicing currency choice. Meanwhile, the introduction of the Local Currency Settlement Framework (LCSF) between Thailand and partner countries including Malaysia and Indonesia moderately reduces dollar reliance, with effects being heterogeneous across firms and industries. Notably, we find that dollar-denominated liabilities do not influence invoicing choice, suggesting some disconnection between operational and financial hedging.

Keywords: Invoicing currency choice; Dollar dominance; Dollar-denominated debt; Local currency settlement framework; Firm-level trade; Thai exports (search for similar items in EconPapers)
JEL-codes: F14 F3 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2026-05
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