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Has the Euro Affected the Choice of Invoicing Currency?

Author

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  • Jenny E. Ligthart
  • Sebastian E. V. Werner
Abstract
We present a new approach to study empirically the effect of the introduction of the euro on the pattern of currency invoicing. Our approach uses a compositional multi- nominal logit model, in which currency choice is explained by both currency-specfic and country-specic determinants. We use unique quarterly panel data of Norwegian imports from OECD countries for the 1996-2006 period. We nd that eurozone countries have substantially increased their share of home currency invoicing after the introduction of the euro, whereas the home currency share of non-eurozone countries fell. In addition, the euro as a vehicle currency has overtaken the role of the US dollar in Norwegian imports. The substantial rise in producer currency invoicing by eurozone countries is primarily caused by a drop in in inflation volatility and can only to a small extent be explained by an unobserved euro effect.

Suggested Citation

  • Jenny E. Ligthart & Sebastian E. V. Werner, 2011. "Has the Euro Affected the Choice of Invoicing Currency?," CAMA Working Papers 2011-03, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2011-03
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    File URL: https://cama.crawford.anu.edu.au/sites/default/files/publication/cama_crawford_anu_edu_au/2021-06/3_ligthart_werner_2011.pdf
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    References listed on IDEAS

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    Cited by:

    1. Ligthart, Jenny E. & Werner, Sebastian E.V., 2012. "Has the euro affected the choice of invoicing currency?," Journal of International Money and Finance, Elsevier, vol. 31(6), pages 1551-1573.
    2. Montfaucon, Angella Faith, 2022. "Invoicing Currency and Symmetric Pass-Through of Exchange Rates and Tariffs: Evidence from Malawian Imports from the EU," International Economics, Elsevier, vol. 169(C), pages 191-207.
    3. Ito, Hiro & Kawai, Masahiro, 2016. "Trade invoicing in major currencies in the 1970s–1990s: Lessons for renminbi internationalization," Journal of the Japanese and International Economies, Elsevier, vol. 42(C), pages 123-145.
    4. Straume, Hans-Martin, 2013. "Currency invoicing in Norwegian salmon export," Working Papers in Economics 11/13, University of Bergen, Department of Economics.
    5. Ahmed Swarnali & Appendino Maximiliano & Ruta Michele, 2017. "Global value chains and the exchange rate elasticity of exports," The B.E. Journal of Macroeconomics, De Gruyter, vol. 17(1), pages 1-24, January.
    6. Luigi Ventura & Mark David Witte, 2017. "Migration and the Currency Denomination of Trade," International Migration Review, Wiley Blackwell, vol. 51(2), pages 452-474, June.
    7. Hiro Ito & Cesar M. Rodriguez, 2020. "Clamoring for greenbacks: Explaining the resurgence of the U.S. dollar in international debt," International Finance, Wiley Blackwell, vol. 23(3), pages 370-391, December.
    8. Angella Faith Montfaucon, 2022. "Euro usage in international trade amidst threats to multilateralism: evidence from Malawian imports," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 49(2), pages 485-507, May.
    9. Ito, Hiro & Chinn, Menzie, 2014. "The Rise of the “Redback” and the People’s Republic of China’s Capital Account Liberalization: An Empirical Analysis of the Determinants of Invoicing Currencies," ADBI Working Papers 473, Asian Development Bank Institute.
    10. Ke Pang & Yao Tang, 2014. "Vertical Trade, Exchange Rate Pass-Through, and the Exchange Rate Regime," Open Economies Review, Springer, vol. 25(3), pages 477-520, July.

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    More about this item

    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities

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