Has the euro affected the choice of invoicing currency?

Jenny E. Ligthart*, Sebastian E. V. Werner

*Corresponding author for this work

    Research output: Contribution to journalArticleAcademicpeer-review

    4 Citations (Scopus)

    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 multinomial logit model, in which currency choice is explained by both currency-specific and country-specific determinants. We use unique quarterly panel data on the invoicing of Norwegian imports from OECD countries for the 1996-2006 period. We find 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 slightly. 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 inflation volatility and can only to a small extent be explained by an unobserved euro effect. (C) 2012 Elsevier Ltd. All rights reserved.

    Original languageEnglish
    Pages (from-to)1551-1573
    Number of pages23
    JournalJournal of International Money and Finance
    Volume31
    Issue number6
    DOIs
    Publication statusPublished - Oct-2012

    Keywords

    • Euro
    • Invoicing currency
    • Exchange rate risk
    • Inflation volatility
    • Vehicle currencies
    • Compositional multinomial logit
    • RATE PASS-THROUGH
    • FRACTIONAL RESPONSE VARIABLES
    • EXCHANGE-RATE DYNAMICS
    • INTERNATIONAL-TRADE
    • VEHICLE CURRENCIES
    • RATES
    • DENOMINATION
    • MARKET
    • EXPORTS

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