-
Growing use of local currencies in Japanese trade with Asian countries: A new puzzle of invoicing currency choice
The choice of invoicing currency is a key strategic decision for a firm in managing exchange risk. When exporters choose their home currency for trade invoicing, they can avoid any foreign exchange risk at least in the short run. Invoicing currency choice is closely related to the exchange rate pass-through and pricing-to-market (PTM) discussed in the literature (e.g. Krugman 1987, Marston 1990, Knetter 1989, 1993). Theory and stylised facts What determines invoicing currency? In practice it is determined by negotiation or bargaining between exporters and importers. Previous studies that employed a partial ... (full story)