Oil Market Structure, Network Effects and the Choice of Currency for Oil Invoicing

33 Pages Posted: 19 Dec 2007

See all articles by Elitza Mileva

Elitza Mileva

European Central Bank; Fordham University - Economics Department

Nikolaus Siegfried

European Central Bank

Date Written: December 2007

Abstract

A recurring theme in recent years in the debate on the international role of currencies has been the possibility of pricing oil in euro. This paper contributes to these debates by providing a detailed review of the empirical evidence regarding the market for crude oil and current oil invoicing practices. It introduces a network effect model to identify the conditions under which a parallel invoicing in different currencies would be possible. The paper also includes a simulation designed to illustrate the dynamics of the currency choice of oil invoicing.

Keywords: Trade invoicing, currency substitution, network effects, oil trade

JEL Classification: G14, O13, Q41

Suggested Citation

Mileva, Elitza and Siegfried, Nikolaus, Oil Market Structure, Network Effects and the Choice of Currency for Oil Invoicing (December 2007). ECB Occasional Paper No. 77, Available at SSRN: https://ssrn.com/abstract=1005940

Elitza Mileva (Contact Author)

European Central Bank ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Fordham University - Economics Department ( email )

441 East Fordham Road
Bronx, NY 10458
United States

Nikolaus Siegfried

European Central Bank ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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