Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153099
Authors: 
Kamps, Annette
Year of Publication: 
2006
Series/Report no.: 
ECB Working Paper 665
Abstract: 
This paper investigates the determinants of currency invoicing in international trade. Although the currency of invoicing is central for the transmission of monetary policy, empirical research on this topic is scarce due to a lack of data. With a new extensive invoicing dataset and a panel model analysis this paper shows that a country’s membership or prospective membership of the EU plays a decisive role in the choice of the euro as invoicing currency. The role of the euro as vehicle currency is increasing but still limited when compared to the U.S. dollar. Monetary instability and low product differentiation favour vehicle pricing in U.S. dollar. An increase of euro invoicing due to higher exchange rate volatility supports the role of the euro as vehicle currency, however. High market power defined as the share of a country’s total exports to world exports and membership of the euro area make invoicing in the home currency (euro) more likely.
Subjects: 
Currency Invoicing
international trade
panel data
JEL: 
F41
F42
L11
Document Type: 
Working Paper

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