Invoicing Currency, Firm Size, and Hedging

We use the results of a survey conducted on a sample of 3,013 exporting firms located in 5 EMU countries to explore the link between the invoicing currency of exports, firm size, and hedging. About 90% of firms in the sample invoice exports in their (producer) currency. Large firms are more likely to use another currency. The aggregate use of the euro is thus 15 percentage points lower when firms are weighted by their size than for the average firm. This heterogeneity is robust to controlling for determinants of the invoicing choice stressed by the literature. We however show that large firms and firms pricing in another currency as the euro are also more likely to hedge against exchange rate risk. An IV estimation shows the causal impact of access to hedging on the choice of the invoicing currency. We find (large) firms having access to hedging being more likely to invoice in the importer’s currency.