Has the Euro Affected the Choice of Invoicing Currency?

Posted: 3 Jan 2013 Last revised: 26 Jan 2013

See all articles by Jenny E. Ligthart

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 Werner

Catholic University of Louvain (UCL)

Multiple version iconThere are 5 versions of this paper

Date Written: October 2, 2012

Abstract

We present a new approach to study empirically the effect of the introduction of the euro on the pattern of currency invoicing. Our approach uses a compositional multinomial logit model, in which currency choice is explained by both currency-specific and country-specific determinants. We use unique quarterly panel data on the invoicing of Norwegian imports from OECD countries for the 1996–2006 period. We find that eurozone countries have substantially increased their share of home currency invoicing after the introduction of the euro, whereas the home currency share of non-eurozone countries fell slightly. In addition, the euro as a vehicle currency has overtaken the role of the US dollar in Norwegian imports. The substantial rise in producer currency invoicing by eurozone countries is primarily caused by a drop in inflation volatility and can only to a small extent be explained by an unobserved euro effect.

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

JEL Classification: F33, F41, F42, E31, C25

Suggested Citation

Ligthart, Jenny E. and Werner, Sebastian, Has the Euro Affected the Choice of Invoicing Currency? (October 2, 2012). Journal of International Money and Finance, Vol. 31, No. 6, 1551-1573, 2012. Available at SSRN: https://ssrn.com/abstract=2195779

Jenny E. Ligthart

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 Werner (Contact Author)

Catholic University of Louvain (UCL) ( email )

Place Montesquieu, 3
Louvain-la-Neuve, 1348
Belgium

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