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Currency invoicing of US imports
Author(s) -
Donnenfeld Shabtai,
Haug Alfred A.
Publication year - 2008
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/ijfe.319
Subject(s) - currency , economics , monetary economics , volatility (finance) , invoice , exchange rate , international economics , financial economics , accounting
Abstract This paper provides an explanation for the choice of currency of invoice of exports to the US. We find an empirical relationship between the riskiness of the exchange rate and the fraction of imports invoiced in the importer's currency, the exporter's currency, and a third country currency. The higher the volatility of the exchange rate, the larger is the fraction of imports invoiced in the importer's currency. Consequently, the fraction of invoicing in the exporter's or a third country currency is inversely related to the volatility of the exchange rate. Copyright © 2007 John Wiley & Sons, Ltd.