Trade invoicing in the accession countries

Description

"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"--National Bureau of Economic Research web site.

Description

"Countries aspiring to join the euro area -- the so-called accession countries -- are increasingly binding their economic activity, external and internal, to the euro-area countries. This phenomenon is observed in the currency invoicing of international trade transactions, where accession countries have reduced their use of the U.S. dollar in invoicing such transactions. According to theory, the optimal invoicing choice for an accession country depends on its composition of exports and imports and on the macroeconomic fluctuations faced by its trade partners, with both factors bearing out the role of herding and hedging considerations within exporter profitability. These considerations yield country-specific estimates of the optimal degree of euro-denominated invoicing of exports. I find that the exporters in some accession countries might be pricing too much of their trade in euros rather than in U.S. dollars, even in their trade transactions with the euro-area and other European Union countries, and thus may be taking on excessive risk in international markets"--Federal Reserve Bank of New York web site.

Subjects

Series Statement

• Staff reports ;
• no. 222
• Staff reports (Federal Reserve Bank of New York : Online) ;

Links

• http://www.ny.frb.org/research/staff_reports/sr222.html
• URL

Other Editions

• Trade invoicing in the accession countries: are they suited to the euro?Electronic resourceFederal Reserve Bank of New York2005-01-01
• Trade invoicing in the accession countriesElectronic resourceNational Bureau of Economic Research2005-01-01