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The Currency Denomination of Trade and Price Discrimination: The Euro after European Union Expansion

Author

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  • Mark David Witte

    (Department of Economics and Finance, College of Charleston)

Abstract

If a country’s imports are invoiced in a foreign currency then the import prices paid by consumers, and the importing country’s inflation rate, are vulnerable to exchange rate movements. Using a unique multiple market model I exam a representative firm’s currency denomination decision when selling to different countries. The simulation studies the impact of EU expansion on the currency denomination of trade. Results suggest that when preferences are similar across countries EU expansion decreases the likelihood of price discrimination and could decrease the use of the euro as an invoicing currency in the original EU’s imports.

Suggested Citation

  • Mark David Witte, "undated". "The Currency Denomination of Trade and Price Discrimination: The Euro after European Union Expansion," Working Papers 3, Department of Economics and Finance, College of Charleston.
    • Handle: RePEc:coc:wpaper:3
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    File URL: http://www.cofc.edu/~econfinc/workingpapers/Witte_CurrDemPDEU.pdf
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    Cited by:

    1. Frank Hefner & Mark David Witte, 2016. "Does Leaving the Eurozone Mean Leaving the Euro?," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 22(3), pages 279-294, August.

    More about this item

    Keywords

    currency invoicing; exchange rate; inflation; EU expansion; price discrimination;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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