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Title: Micro, Macro, and Strategic Forces in International Trade Invoicing

Author(s): Linda S. Goldberg and C�dric Tille

Publication Date: November 2009

Keyword(s): international trade, Invoicing currency, pass-through and vehicle currency

Programme Area(s): International Macroeconomics

Abstract: The use of different currencies in the invoicing of international trade transactions plays a major role in the international transmission of economic fluctuations. Existing studies argue that an exporter?s invoicing choice reflects structural aspects of her industry, such as market share and the price sensitivity of demand, the hedging of marginal costs, due for instance to the use of imported inputs, and macroeconomic volatility. We use a new highly disaggregated dataset to assess the roles of the various invoicing determinants. We find support for the factors identified in the literature, and document a new feature, in the form of a link between shipments size and invoicing. Specifically, larger transactions are more likely to be invoiced in the importer?s currency. We offer a potential theoretical explanation for the empirical link between transaction size and invoicing by allowing invoicing to be set through a bargaining between exporters and importers, a feature that is absent from existing models despite its empirical relevance.

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Bibliographic Reference

Goldberg, L and Tille, C. 2009. 'Micro, Macro, and Strategic Forces in International Trade Invoicing'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=7534