Micro, Macro and Strategic Forces in International Trade Invoicing

44 Pages Posted: 16 Nov 2009

See all articles by Linda S. Goldberg

Linda S. Goldberg

Federal Reserve Bank of New York; National Bureau of Economic Research (NBER)

Cédric Tille

Graduate Institute of International and Development Studies (HEI)

Multiple version iconThere are 4 versions of this paper

Date Written: November 1, 2009

Abstract

The use of different currencies in the invoicing of international trade transactions plays a major role in the international transmission of economic fluctuations. Existing studies argue that an exporter’s invoicing choice reflects structural aspects of its industry, such as market share and the price sensitivity of demand, as well as the hedging of marginal costs (due, for instance, to the use of imported inputs) and macroeconomic volatility. We use a new, highly disaggregated data set to assess the roles of the various invoicing determinants. Our findings support the factors identified in the literature and document a new feature: a link between shipment size and invoicing. Specifically, larger transactions are more likely to be invoiced in the importer’s currency. We offer a theoretical explanation for the empirical link between transaction size and invoicing by allowing invoicing to be set through bargaining between exporters and importers, a feature absent from existing models despite its empirical relevance.

Keywords: invoicing currency, vehicle currency, pass-through, international trade

JEL Classification: F3, F4

Suggested Citation

Goldberg, Linda S. and Tille, Cedric, Micro, Macro and Strategic Forces in International Trade Invoicing (November 1, 2009). FRB of New York Staff Report No. 405. Available at SSRN: https://ssrn.com/abstract=1507115 or http://dx.doi.org/10.2139/ssrn.1507115

Linda S. Goldberg (Contact Author)

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-2836 (Phone)
212-720-6831 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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Cedric Tille

Graduate Institute of International and Development Studies (HEI) ( email )

PO Box 136
Geneva, CH-1211
Switzerland

HOME PAGE: http://sites.google.com/site/cedrictilleheid/home

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