Trade Invoicing in the Accession Countries: Are They Suited to the Euro?

39 Pages Posted: 25 May 2006

See all articles by Linda S. Goldberg

Linda S. Goldberg

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

Date Written: October 2005

Abstract

The accession countries to the euro area are increasingly binding their economic activity, external and internal, to the euro area countries. One aspect of this phenomenon concerns the currency invoicing of international trade transactions, where accession countries have reduced their use of the US dollar in invoicing international trade transactions. Theory predicts that the optimal invoicing choices for accession countries depend on the composition of goods in exports and imports and on the macroeconomic fluctuations of trade partners, both bearing on the role of herding and hedging considerations within exporter profitability. These considerations yield country-specific estimates about the degree of euro-denominated invoicing of exports. I find that the exporters of some accession countries, even in their trade transactions with the euro zone and other European Union countries, might be pricing too much of their trade in euros rather than in dollars, thus taking on excessive risk in international markets.

Suggested Citation

Goldberg, Linda S., Trade Invoicing in the Accession Countries: Are They Suited to the Euro? (October 2005). NBER Working Paper No. w11653. Available at SSRN: https://ssrn.com/abstract=819813

Linda S. Goldberg (Contact Author)

Federal Reserve Bank of New York ( email )

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New York, NY 10045
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212-720-2836 (Phone)
212-720-6831 (Fax)

National Bureau of Economic Research (NBER)

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