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Dollar Invoicing and the Heterogeneity of Exchange Rate Pass-Through

Author

Listed:
  • Emine Boz
  • Gita Gopinath
  • Mikkel Plagborg-Møller

Abstract

We show empirically that the variation across country pairs in exchange rate pass-through and trade elasticity is meaningfully explained by the dollar's dominance as invoicing currency. We use a hierarchical Bayesian approach to directly and flexibly model pass-through heterogeneity conditional on the invoicing currency share. We estimate that the importer's country-level dollar invoicing share explains 15 percent of the overall variance across trading pairs in dollar exchange rate pass-through into bilateral prices.

Suggested Citation

  • Emine Boz & Gita Gopinath & Mikkel Plagborg-Møller, 2019. "Dollar Invoicing and the Heterogeneity of Exchange Rate Pass-Through," AEA Papers and Proceedings, American Economic Association, vol. 109, pages 527-532, May.
    • Handle: RePEc:aea:apandp:v:109:y:2019:p:527-32
    Note: DOI: 10.1257/pandp.20191009
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    Citations

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    Cited by:

    1. Beck, Roland & Berganza, Juan Carlos & Brüggemann, Axel & Cezar, Rafael & Eijking, Carlijn & Eller, Markus & Fuentes, Alberto & Alves, Joel Graça & Kreitz, Lilian & Marsilli, Clement & Moder, Isabella, 2023. "Recent advances in the literature on capital flow management," Occasional Paper Series 317, European Central Bank.
    2. Yining Geng, 2020. "Impact of Family Planning Policy on Gender Inequality: Evidence from China," Working Papers 202009, University of Liverpool, Department of Economics.
    3. Camatte, Hadrien & Daudin, Guillaume & Faubert, Violaine & Rifflart, Christine, 2023. "Estimating the elasticity of consumer prices to the exchange rate: An accounting approach," Journal of International Money and Finance, Elsevier, vol. 137(C).
    4. Ferrari Minesso, Massimo & Gräb, Johannes, 2022. "E pluribus plures: shock dependency of the USD pass-through to real and financial variables," Working Paper Series 2684, European Central Bank.
    5. Torsten Ehlers & Mathias Hoffmann & Alexander Raabe, 2020. "Non-US global banks and dollar (co-)dependence: how housing markets became internationally synchronized," BIS Working Papers 897, Bank for International Settlements.
    6. Yining Geng, 2020. "Impact of Family Planning Policy on Gender Inequality: Evidence from China," Working Papers 202008, University of Liverpool, Department of Economics.
    7. Pierre-Richard Agénor & Timothy Jackson & Luiz Awazu Pereira da Silva, 2020. "Foreign exchange intervention and financial stability," BIS Working Papers 889, Bank for International Settlements.
    8. Giancarlo Corsetti & Meredith Crowley & Lu Han, 2020. "Invoicing and Pricing-to-market: Evidence on international pricing by UK exporters," Working Papers 202007, University of Liverpool, Department of Economics.

    More about this item

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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