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Trade invoicing in the accession countries: are they suited to the Euro?

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Abstract
Countries aspiring to join the euro area-the so-called accession countries-are increasingly binding their economic activity, external and internal, to the euro-area countries. This phenomenon is observed in the currency invoicing of international trade transactions, where accession countries have reduced their use of the U.S. dollar in invoicing such transactions. According to theory, the optimal invoicing choice for an accession country depends on its composition of exports and imports and on the macroeconomic fluctuations faced by its trade partners, with both factors bearing out the role of herding and hedging considerations within exporter profitability. These considerations yield country-specific estimates of the optimal degree of euro-denominated invoicing of exports. I find that the exporters in some accession countries might be pricing too much of their trade in euros rather than in U.S. dollars, even in their trade transactions with the euro-area and other European Union countries, and thus may be taking on excessive risk in international markets.

Suggested Citation

  • Linda S. Goldberg, 2005. "Trade invoicing in the accession countries: are they suited to the Euro?," Staff Reports 222, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednsr:222
    Note: For a published version of this report, see Linda Goldberg, "Trade Invoicing in the Accession Countries: Are They Suited to the Euro?" in Jeffrey Frankel and Francesco Giavazzi, eds., NBER International Seminar on Macroeconomics. Chicago: U. Chicago Press. This is the international version of the NBER Macro Annual Staff Reports.
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    Cited by:

    1. Novy, Dennis, 2006. "Hedge Your Costs: Exchange Rate Risk and Endogenous Currency Invoicing," The Warwick Economics Research Paper Series (TWERPS) 765, University of Warwick, Department of Economics.
    2. Lipinska, Anna, 2008. "The Maastricht Convergence Criteria and Monetary Regimes for the EMU Accession Countries," MPRA Paper 16375, University Library of Munich, Germany.
    3. Ligthart, J.E. & Da Silva, J., 2007. "Currency Invoicing in International Trade : A Panel Data Approach," Other publications TiSEM 861fb576-0ae9-4da6-9589-2, Tilburg University, School of Economics and Management.
    4. Benguria, Felipe & Wagner, Rodrigo, 2024. "Trade invoicing currencies and exchange rate pass-through: The introduction of the euro as a natural experiment," Journal of International Economics, Elsevier, vol. 150(C).
    5. Maria V. Sokolova, 2016. "Better More Than One: Portfolio Currency Pricing and Exchange Rate Hedging," IHEID Working Papers 03-2016, Economics Section, The Graduate Institute of International Studies.
    6. Oxana Babetskaia-Kukharchuk & Ian Babetskii & Jiri Podpiera, 2008. "Convergence in exchange rates: market's view on CE-4 joining EMU," Applied Economics Letters, Taylor & Francis Journals, vol. 15(5), pages 385-390.
    7. Linda S. Goldberg, 2011. "The international role of the dollar: Does it matter if this changes?," Staff Reports 522, Federal Reserve Bank of New York.
    8. Kamps, Annette, 2006. "The euro as invoicing currency in international trade," Working Paper Series 665, European Central Bank.
    9. Anna Lipinska, 2006. "Monetary regime choice in the accession countries - a theoretical analysis," Computing in Economics and Finance 2006 243, Society for Computational Economics.
    10. Maria V. Sokolova, 2015. "Strategic Currency Choice in International Trade," CESifo Working Paper Series 5574, CESifo.
    11. Elias Papaioannou & Richard Portes, 2008. "The international role of the euro: a status report," European Economy - Economic Papers 2008 - 2015 317, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    12. Slavov, Slavi T., 2008. "Measuring and modeling the effects of G-3 exchange rate fluctuations on small open economies: A natural experiment," Economic Systems, Elsevier, vol. 32(3), pages 253-273, September.

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    More about this item

    Keywords

    euro area; invoicing; accession country; exchange-rate pass-through; trade; vehicle currency;
    All these keywords.

    JEL classification:

    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • F3 - International Economics - - International Finance

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