Download or read book Trade Finance and Endogenous Invoicing Currency written by Tao Liu and published by . This book was released on 2018 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial market imperfections severely restrict currency usage in international trade, but formal analysis is elusive.(Gopinath, 2015) This paper develops a three-country sticky price model with financial frictions to address the endogenous invoicing currency choices in international trade. In our unified framework exporters' invoicing currency decisions are linked to financial, industrial and macroeconomics forces, with the key innovation on financial channel. Using highly disaggregated data from Colombia, we provide new firm-level evidence that financial factors significantly affect the patterns of currency usage. We show that exporters prefer the currency with a more developed financial market, especially for small firms in financially vulnerable sectors. In particular, a developing country with medium-level of financial development could enhance its currency usage by more than 10% if it further develops the financial market. Furthermore, volatile exchange rate will increase the chance of using the vehicle currency. We also confirm empirically the importance of industrial and strategic factors for invoicing currency decision, although they only have the secondary effects.
Download or read book Dominant Currency Paradigm A New Model for Small Open Economies written by Camila Casas and published by International Monetary Fund. This book was released on 2017-11-22 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: Most trade is invoiced in very few currencies. Despite this, the Mundell-Fleming benchmark and its variants focus on pricing in the producer’s currency or in local currency. We model instead a ‘dominant currency paradigm’ for small open economies characterized by three features: pricing in a dominant currency; pricing complementarities, and imported input use in production. Under this paradigm: (a) the terms-of-trade is stable; (b) dominant currency exchange rate pass-through into export and import prices is high regardless of destination or origin of goods; (c) exchange rate pass-through of non-dominant currencies is small; (d) expenditure switching occurs mostly via imports, driven by the dollar exchange rate while exports respond weakly, if at all; (e) strengthening of the dominant currency relative to non-dominant ones can negatively impact global trade; (f) optimal monetary policy targets deviations from the law of one price arising from dominant currency fluctuations, in addition to the inflation and output gap. Using data from Colombia we document strong support for the dominant currency paradigm.
Download or read book Finance of Foreign Trade and Foreign Exchange written by Asrar H. Siddiqi and published by Royal Publishing Company. This book was released on 1994 with total page 296 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Hedge Your Costs written by Dennis Novy and published by . This book was released on 2006 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Patterns in Invoicing Currency in Global Trade written by Emine Boz and published by . This book was released on 2020-07-17 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents the most comprehensive and up-to-date panel data set of invoicing currencies in global trade. It provides data on the shares of exports and imports invoiced in US dollars, euros, and other currencies for more than 100 countries since 1990. The evidence from these data confirms findings from earlier research regarding the globally dominant role of the US dollar in invoicing - despite the comparatively smaller role of the US in global trade - and the overall stability of invoicing currency patterns. The evidence also points to several novel facts. First, both the US dollar and the euro have been increasingly used for invoicing even as the share of global trade accounted for by the US and the euro area has declined. Second, the euro is used as a vehicle currency in parts of Africa, and some European countries have seen significant shifts toward euro invoicing. Third, as suggested by the dominant currency paradigm, countries invoicing more in US dollars (euros) tend to experience greater US dollar (euro) exchange rate pass-through to their import prices; also, their trade volumes are more sensitive to fluctuations in these exchange rates.
Download or read book Invoicing Currency in International Trade written by Edwin L.-C. Lai and published by . This book was released on 2014 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: To play the role of a unit of account, an international currency must be a currency widely used to invoice international trade. This paper investigates the determinants of the use of currency in trade invoicing and evaluates the potential of the renminbi for the denomination of cross-border transactions in the Asia-Pacific region. In particular, we develop a simple model and establish the evidence showing that there is a convex relationship between the invoicing share of a currency and the economic size of its issuing country because of a coalescing effect and thick market externalities. We use the ratio of the foreign exchange turnover share of a currency to the global GDP share of its issuing country as a proxy for the size of thick market externalities, which we argue reflects capital account openness, financial development, and exchange rate stability of a country. This ratio is very small for the renminbi compared with that for established international currencies. Our quantitative analysis suggests that the renminbi can be a major invoicing currency in the region only if China sufficiently opens up its capital account and liberalizes its financial sector. We also draw a parallel between the renminbi and the euro and forecast the invoicing share of the renminbi in the Asia-Pacific region if the renminbi market attained the same degree of thickness as the euro.
Download or read book The Japanese Yen as an International Currency written by Mr.George S. Tavlas and published by International Monetary Fund. This book was released on 1991-01-01 with total page 61 pages. Available in PDF, EPUB and Kindle. Book excerpt: The role of the Japanese yen as an international currency is assessed. It is found that the determinants of international-currency use imply some increase for the yen’s use in international finance; however, the implications for the yen’s use in international trade are mixed. It is also shown that, despite Japan’s emergence as the world’s largest net creditor nation, Japan’s capital outflows have not significantly facilitated the yen’s internationalization. Data are presented showing that, although the yen’s use as an international currency has increased, it is still rather modest. Wider use of the yen as a regional currency in Asia has occurred, though a “yen-zone” does not appear to be emerging.
Download or read book Global Trade and the Dollar written by Ms.Emine Boz and published by International Monetary Fund. This book was released on 2017-11-13 with total page 66 pages. Available in PDF, EPUB and Kindle. Book excerpt: We document that the U.S. dollar exchange rate drives global trade prices and volumes. Using a newly constructed data set of bilateral price and volume indices for more than 2,500 country pairs, we establish the following facts: 1) The dollar exchange rate quantitatively dominates the bilateral exchange rate in price pass-through and trade elasticity regressions. U.S. monetary policy induced dollar fluctuations have high pass-through into bilateral import prices. 2) Bilateral non-commodities terms of trade are essentially uncorrelated with bilateral exchange rates. 3) The strength of the U.S. dollar is a key predictor of rest-of-world aggregate trade volume and consumer/producer price inflation. A 1 percent U.S. dollar appreciation against all other currencies in the world predicts a 0.6–0.8 percent decline within a year in the volume of total trade between countries in the rest of the world, controlling for the global business cycle. 4) Using a novel Bayesian semiparametric hierarchical panel data model, we estimate that the importing country’s share of imports invoiced in dollars explains 15 percent of the variance of dollar pass-through/elasticity across country pairs. Our findings strongly support the dominant currency paradigm as opposed to the traditional Mundell-Fleming pricing paradigms.
Download or read book Dominant Currencies and External Adjustment written by Gustavo Adler and published by International Monetary Fund. This book was released on 2020-07-20 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: The extensive use of the US dollar when firms set prices for international trade (dubbed dominant currency pricing) and in their funding (dominant currency financing) has come to the forefront of policy debate, raising questions about how exchange rates work and the benefits of exchange rate flexibility. This Staff Discussion Note documents these features of international trade and finance and explores their implications for how exchange rates can help external rebalancing and buffer macroeconomic shocks.
Download or read book Exchange Rate Economics written by Ronald MacDonald and published by Routledge. This book was released on 2005 with total page 334 pages. Available in PDF, EPUB and Kindle. Book excerpt: ''In summary, the book is valuable as a textbook both at the advanced undergraduate level and at the graduate level. It is also very useful for the economist who wants to be brought up-to-date on theoretical and empirical research on exchange rate behaviour.'' ""Journal of International Economics""
Download or read book Renminbi Internationalization written by Barry Eichengreen and published by Brookings Institution Press. This book was released on 2015-02-11 with total page 401 pages. Available in PDF, EPUB and Kindle. Book excerpt: A Brookings Institution Press and Asian Development Bank Institute publication Meet the next global currency: the Chinese renminbi, or the "redback." Following the global financial crisis of 2008, China's major monetary policy objective is the internationalization of the renminbi, that is, to create an inter-national role for its currency akin to the international role currently played by the U.S. dollar. Renminbi internationalization is a hot topic, for good reason. It is, essentially, a window onto the Chinese government's aspirations and the larger process of economic and financial transformation. Making the renminbi a global currency requires rebalancing the Chinese economy, developing the country's financial markets and opening them to the rest of the world, and moving to a more flexible exchange rate. In other words, the internationalization of the renminbi is a monetary and financial issue with much broader supra-monetary and financial implications. This book offers a new perspective on the larger issues of economic, financial, and institutional change in what will eventually be the world's largest economy.
Download or read book Commodity Prices and Markets written by Takatoshi Ito and published by University of Chicago Press. This book was released on 2011-03 with total page 346 pages. Available in PDF, EPUB and Kindle. Book excerpt: Fluctuations of commodity prices, most notably of oil, capture considerable attention and have been tied to important economic effects. This book advances our understanding of the consequences of these fluctuations, providing both general analysis and a particular focus on the countries of the Pacific Rim.
Download or read book International Trade and Currency Exchange written by Hélène Rey and published by . This book was released on 1999 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Macroeconomic Effects of Trade Tariffs written by Jesper Lindé and published by International Monetary Fund. This book was released on 2017-07-07 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the robustness of the Lerner symmetry result in an open economy New Keynesian model with price rigidities. While the Lerner symmetry result of no real effects of a combined import tariff and export subsidy holds up approximately for a number of alternative assumptions, we obtain quantitatively important long-term deviations under complete international asset markets. Direct pass-through of tariffs and subsidies to prices and slow exchange rate adjustment can also generate significant short-term deviations from Lerner. Finally, we quantify the macroeconomic costs of a trade war and find that they can be substantial, with permanently lower income and trade volumes. However, a fully symmetric retaliation to a unilaterally imposed border adjustment tax can prevent any real or nominal effects.
Download or read book The Emergence of the Euro as an International Currency written by George Alogoskoufis and published by . This book was released on 1997 with total page 82 pages. Available in PDF, EPUB and Kindle. Book excerpt: The European Union will enter Stage Three of Economic and Monetary Union (EMU) in 1999. The development of euro financial markets and thickness externalities in the use of the euro as a means of payment will be the major factors determining the importance of the euro as an international currency. As euro securities markets become deeper and more liquid and transactions costs fall, euro assets will become more attractive, and the use of the euro as a vehicle currency will expand; the two effects interact, as we demonstrate. We use a three-region world model as a framework for alternative steady-state scenarios. With forex and securities market data, we assess the plausibility of those scenarios and the implications for economic efficiency (welfare). We find that the euro may take on some of the current roles of the dollar. The welfare analysis reveals potential quantitatively significant benefits for the euro area, at the cost of the US and (to a lesser degree) Japan.
Download or read book Global Value Chains and the Exchange Rate Elasticity of Exports written by Swarnali Ahmed and published by International Monetary Fund. This book was released on 2015-11-30 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes how the formation of Global Value Chains (GVCs) has affected the exchange rate elasticity of exports. Using a panel framework covering 46 countries over the period 1996-2012, we first find some suggestive evidence that the elasticity of real manufacturing exports to the Real Effective Exchange Rate (REER) has decreased over time. We then examine whether the formation of supply chains has affected this elasticity using different measures of GVC integration. Intuitively, as countries are more integrated in global production processes, a currency depreciation only improves competitiveness of a fraction of the value of final good exports. In line with this intuition, we find evidence that GVC participation reduces the REER elasticity of manufacturing exports by 22 percent, on average.
Download or read book Managing Currency Risk written by Takatoshi Ito and published by Edward Elgar Publishing. This book was released on 2018-07-27 with total page 298 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book demonstrates how exporters’ decisions regarding choice of invoice currency can be influenced by many factors including firm size, product competitiveness, intra/inter-firm trades, and the geography of export destination. The aim is to enhance our understanding of exporters’ behavior in terms of managing currency risk. It contains detailed research and insightful data focusing on Japanese exporters and shows how they face an important trade-off in choosing the invoice currency. If exports are invoiced in yen, then exchange rate fluctuations will pass through to retail prices ultimately affecting sales volumes. However, if they choose to invoice in the importer’s currency, then sales volumes are largely unchanged.
