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

Chung, Wanyu

Authors

Wanyu Chung Wanyu.Chung@nottingham.ac.uk



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.

Journal Article Type Article
Publication Date Mar 3, 2016
Journal Journal of International Economics
Print ISSN 0022-1996
Electronic ISSN 0022-1996
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 98
APA6 Citation Chung, W. (2016). Imported inputs and invoicing currency choice: theory and evidence from UK transaction data. Journal of International Economics, 98, https://doi.org/10.1016/j.jinteco.2015.11.003
DOI https://doi.org/10.1016/j.jinteco.2015.11.003
Keywords Currency of invoicing; Imported inputs; UK trade
Publisher URL http://www.sciencedirect.com/science/article/pii/S0022199615001579
Copyright Statement Copyright information regarding this work can be found at the following address: http://eprints.nottingh.../end_user_agreement.pdf

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Copyright Statement
Copyright information regarding this work can be found at the following address: http://eprints.nottingham.ac.uk/end_user_agreement.pdf





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