IDEAS home Printed from https://ideas.repec.org/a/bla/reviec/v5y1997i1p118-28.html
   My bibliography  Save this article

Currency Quandary: The Choice of Invoicing Currency under Exchange-Rate Uncertainty

Author

Listed:
  • Johnson, Martin
  • Pick, Daniel

Abstract

Recent studies have derived optimal invoicing strategies for an exporting firm when exchange rates are uncertain. However, these studies fail to explain trade transacted in a third currency (vehicle currency). In this study, we extend existing models to include the possibility that trade occurs in a vehicle currency. We find that under conditions stipulated by existing models, vehicle-currency invoicing is not preferred. The presence of a competing exporter under imperfect competition, however, can induce vehicle-currency pricing. This is consistent with trade in many primary commodities dominated by few exporters with many importers but where commodities are not perfectly homogeneous. Copyright 1997 by Blackwell Publishing Ltd.

Suggested Citation

  • Johnson, Martin & Pick, Daniel, 1997. "Currency Quandary: The Choice of Invoicing Currency under Exchange-Rate Uncertainty," Review of International Economics, Wiley Blackwell, vol. 5(1), pages 118-128, February.
    • Handle: RePEc:bla:reviec:v:5:y:1997:i:1:p:118-28
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bacchetta, Philippe & van Wincoop, Eric, 2005. "A theory of the currency denomination of international trade," Journal of International Economics, Elsevier, vol. 67(2), pages 295-319, December.
    2. Kamps, Annette, 2006. "The euro as invoicing currency in international trade," Working Paper Series 665, European Central Bank.
    3. Shabtai Donnenfeld & Alfred A. Haug, 2008. "Currency invoicing of US imports," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 13(2), pages 184-198.
    4. Castillo, Paul & Montoro, Carlos, 2015. "Distribución de Ingresos y Dolarización Endógena," Working Papers 2015-002, Banco Central de Reserva del Perú.
    5. Jean‐Philippe Gervais & Bruno Larue, 2009. "A joint test of market power, menu costs, and currency invoicing," Agricultural Economics, International Association of Agricultural Economists, vol. 40(1), pages 29-41, January.
    6. ITO Takatoshi & KOIBUCHI Satoshi & SATO Kiyotaka & SHIMIZU Junko, 2010. "Determinants of Currency Invoicing in Japanese Exports: A firm-level analysis," Discussion papers 10034, Research Institute of Economy, Trade and Industry (RIETI).
    7. Bacchetta, Philippe & van Wincoop, Eric, 2005. "A theory of the currency denomination of international trade," Journal of International Economics, Elsevier, vol. 67(2), pages 295-319, December.
    8. Shabtai Donnenfeld & Alfred Haug, 2003. "Currency Invoicing in International Trade: an Empirical Investigation," Review of International Economics, Wiley Blackwell, vol. 11(2), pages 332-345, May.
    9. Ligthart, J.E. & Da Silva, J., 2007. "Currency Invoicing in International Trade : A Panel Data Approach," Discussion Paper 2007-25, Tilburg University, Center for Economic Research.
    10. Straume, Hans-Martin, 2013. "Currency invoicing in Norwegian salmon export," Working Papers in Economics 11/13, University of Bergen, Department of Economics.
    11. Mahmudul Anam & Ghulam Hussain Anjum & Shin-Hwan Chiang, 2015. "Optimum choice of invoice currency with correlated exchange rates-super-†," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 24(8), pages 1117-1129, December.
    12. Takatoshi Ito & Satoshi Koibuchi & Kiyotaka Sato & Junko Shimizu, 2010. "Why has the yen failed to become a dominant invoicing currency in Asia? A firm-level analysis of Japanese Exporters' invoicing behavior," NBER Working Papers 16231, National Bureau of Economic Research, Inc.
    13. Gervais, Jean-Philippe & Larue, Bruno, 2006. "A Joint Test of Price Discrimination, Menu Cost and Currency Invoicing," MPRA Paper 565, University Library of Munich, Germany.
    14. Gervais, Jean-Philippe & Larue, Bruno, 2004. "A Joint Test Of Pricing-To-Market, Menu Cost And Currency Invoicing," 2004 Annual meeting, August 1-4, Denver, CO 20295, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:reviec:v:5:y:1997:i:1:p:118-28. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0965-7576 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.