The Currency Denomination of External European Union Imports after European Union Expansion

Posted: 20 Dec 2009

Abstract

Using a multiple market model I examine the impact of euro expansion on the optimal currency denomination of external EU imports. Results suggest euro invoicing will increase more in the EU-expansion country than in the original EU. Exporting firms from dollar bloc countries (the U.S. or countries with fixed exchange rates with the dollar) are more likely to invoice in the euro if price discrimination is already optimal. Firms from outside the dollar bloc are more likely to use the euro when the original EU market is relatively large or transaction costs of exchanging the euro are relatively small.

Keywords: Currency invoicing, Exchange rate, Inflation, EU expansion, Price discrimination

JEL Classification: F14, F31

Suggested Citation

Witte, Mark David David, The Currency Denomination of External European Union Imports after European Union Expansion. Economic Systems, Vol. 33, No. 3, 2009, Available at SSRN: https://ssrn.com/abstract=1480577

Mark David David Witte (Contact Author)

College of Charleston ( email )

66 George Street
Charleston, SC 29424
United States

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