Micro, Macro, and Strategic Forces in International Trade Invoicing

HKIMR Working Paper No. 08/2010

44 Pages Posted: 22 Jun 2010

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: April 30, 2010

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 her industry, such as market share and the price-sensitivity of demand, the hedging of marginal costs, due for instance to the use of imported inputs, and macroeconomic volatility. We use a new highly disaggregated dataset to assess the roles of the various invoicing determinants. We find support for the factors identified in the literature, and document a new feature, in the form of a link between shipments size and invoicing. Specifically, larger transactions are more likely to be invoiced in the importer’s currency. We offer a potential theoretical explanation for the empirical link between transaction size and invoicing by allowing invoicing to be set through a bargaining between exporters and importers, a feature that is 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 (April 30, 2010). HKIMR Working Paper No. 08/2010. Available at SSRN: https://ssrn.com/abstract=1628029 or http://dx.doi.org/10.2139/ssrn.1628029

Linda S. Goldberg

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)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Cedric Tille (Contact Author)

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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