Amiti, Mary, Itskhoki, Oleg and Konings, Jozef 
ORCID: 0000-0003-1280-4674
(2022)
Dominant Currencies: How Firms Choose Currency Invoicing and Why it Matters.
The Quarterly Journal of Economics, 137 (3).
pp. 1435-1493.
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Abstract
<jats:title>Abstract</jats:title> <jats:p>We analyze how firms choose the currency of invoicing and the implications of this choice for exchange rate pass-through into export prices and quantities. Using a new data set for Belgian firms, we find currency invoicing to be an active firm-level decision, shaped by the firm’s size, exposure to imported inputs, and the currency choices of its competitors. Our results show that a firm’s currency choice, in turn, has a direct causal effect on the exchange rate pass-through into prices and quantities. Moreover, the differential price response of similar firms that invoice in different currencies is large, persists beyond a one-year horizon, and gradually wanes in the long run. This results in allocative expenditure-switching effects on export quantities, which build up over time, suggesting a role for quantity adjustment frictions in addition to price stickiness. Our findings shed light on the mechanisms that make or break a dominant currency and the consequences it has for the international transmission of shocks.</jats:p>
| Item Type: | Article |
|---|---|
| Divisions: | Faculty of Humanities and Social Sciences > School of Management |
| Depositing User: | Symplectic Admin |
| Date Deposited: | 23 Dec 2021 08:58 |
| Last Modified: | 02 Apr 2024 15:08 |
| DOI: | 10.1093/qje/qjac004 |
| Related URLs: | |
| URI: | https://livrepository.liverpool.ac.uk/id/eprint/3145941 |
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