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http://ssrn.com/abstract=1609725
 
 

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Has the Euro Affected the Choice of Invoicing Currency?


Jenny E. Ligthart


Tilburg University - CentER, Department of Economics; University of Groningen - Faculty of Economics and Business; CESifo (Center for Economic Studies and Ifo Institute)

Sebastian E. V. Werner


Independent

May 12, 2010

CentER Discussion Paper Series No. 2010-48

Abstract:     
We present a new approach to study empirically the effect of the introduction of the euro on currency invoicing. Our approach uses a compositional multinomial logit model, in which currency choice depends on the characteristics of both the currency and the country. We use unique quarterly panel data of Norwegian imports from OECD countries for the 1996-2006 period. One of the key findings is that the eurozone countries in trade with Norway have substantially increased their share of home currency invoicing after the introduction of the euro. In addition, the euro as a vehicle currency has overtaken the role of the US dollar in Norwegian imports. The econometric analysis shows a significant effect of euro introduction above and beyond the determinants of currency invoicing (i.e., inflation rate, inflation volatility, foreign exchange market size, and product composition). However, the rise in producer currency invoicing by eurozone countries is primarily caused by a drop in inflation volatility.

Number of Pages in PDF File: 51

Keywords: euro, invoicing currency, exchange rate risk, inflation, inflation risk, vehicle currencies, compositional multinomial logit

JEL Classification: F14, F15, F31, F33, F36, E31, C25

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Date posted: May 17, 2010  

Suggested Citation

Ligthart, Jenny E. and Werner, Sebastian E. V., Has the Euro Affected the Choice of Invoicing Currency? (May 12, 2010). CentER Discussion Paper Series No. 2010-48. Available at SSRN: http://ssrn.com/abstract=1609725 or http://dx.doi.org/10.2139/ssrn.1609725

Contact Information

Jenny E. Ligthart (Contact Author)
Tilburg University - CentER, Department of Economics ( email )
P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 8755 (Phone)
+31 13 466 4032 (Fax)
University of Groningen - Faculty of Economics and Business ( email )
Postbus 72
9700 AB Groningen
Netherlands
CESifo (Center for Economic Studies and Ifo Institute)
Poschinger Str. 5
Munich, DE-81679
Germany
Sebastian E. V. Werner
Independent ( email )
No Address Available
Feedback to SSRN


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