Imported inputs and invoicing currency choice: theory and evidence from UK transaction data

Chung, Wanyu (2016) Imported inputs and invoicing currency choice: theory and evidence from UK transaction data. Journal of International Economics, 98 . pp. 237-250. ISSN 0022-1996

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Abstract

A significant proportion of international trade is in intermediate goods. This paper considers theoretically and empirically how exporters' dependence on imported inputs affects their choice of invoicing currency. The model predicts that exporters that depend more on foreign currency-denominated inputs are less likely to price in their home currency. I test this and other theoretical results using a novel dataset that covers UK trade transactions with non-EU countries. I find considerable support for the model's predictions. A 10 percentage point higher share of foreign currency-denominated inputs is associated with a 20 percentage point higher probability of pricing in the same foreign currency relative to the producer's currency.

Item Type: Article
Keywords: Currency of invoicing; Imported inputs; UK trade
Schools/Departments: University of Nottingham UK Campus > Faculty of Social Sciences > School of Economics
Identification Number: https://doi.org/10.1016/j.jinteco.2015.11.003
Depositing User: Chung, Wanyu
Date Deposited: 22 Jan 2016 11:55
Last Modified: 16 Sep 2016 00:55
URI: http://eprints.nottingham.ac.uk/id/eprint/31338

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