The paper empirically investigates the determinants of currency invoicing in Dutch goods trade with OECD countries. To this end, a currency-share systems approach is employed, which is applied to quarterly panel data for 1987–1998. One of the key findings is that a coun... View more
5Early formal contributions are those by Magee (1973), McKinnon (1979), Cornell (1980), Rao and Magee (1980), Giovannini (1988), Donnenfeld and Zilcha (1991), and Viaene and De Vries (1992). More recent work is that of Johnson and Pick (1997), Friberg (1998), Deverau, Engel, and Storgaard (2004), and Bacchetta and Van Wincoop (2005).
6See Magee (1974), Page (1977), Carse and Wood (1979), Carse, Williamson, and Wood (1979), Van Nieuwkerk (1979), Page (1981), Van der Toorn (1986), Melvin and Sultan (1990), Hartmann (1998), and Dominguez (1999).
7Our work builds on the unpublished report of Ligthart (1991), who employs a systems-panel data approach for the Netherlands to study the determinants of the choice of invoicing currency. Ligthart's work is extended by: (i) employing a larger panel data set (i.e., a higher data frequency, a longer time span, and a larger number of countries); and (ii) testing for a larger set of potential determinants.
8Openness is defined as the ratio of the sum of exports and imports to Gross Domestic Product (GDP).
The average degree of openness of the Netherlands during our sample period is 102.3 percent compared with 65.2 percent and 60.8 percent for Canada and Sweden (Summers, Heston, and Aten, 2006).
Donnenfeld, S., and I. Zilcha (1991): “Pricing of Exports and Exchange Rate Uncertainty,” Review of International Economics, 32, 1009-1022.
Magee, S. P. (1973): “Currency Contracts, Pass-Through and Devaluation,” Brookings Papers on Economic Activity, 1973, 303-325.
(1974): “US Import Prices in the Currency-Contract Period,” Brookings Papers on Economic Activity, 1974, 117-168.
Magee, S. P., and R. K. S. Rao (1980): “Vehicle and Nonvehicle Currencies in International Trade,” American Economic Review, 70, 368-373.
Matsuyama, K., N. Kiyotaki, and A. Matsui (1993): “Toward a Theory of International Currency,” Review of Economic Studies, 60, 283-307.