The currency denomination of exports — A questionnaire study

Friberg, Richard; Wilander, Fredrik

doi:10.1016/j.jinteco.2007.09.003

Cited by 100 publications

(93 citation statements)

References 32 publications

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“…Also, the fact that in ‡ationary currencies are less likely to be used is documented. 9 Some studies turn to a survey approach, such as Friberg and Wilander (2008) for Swedish exporters and Ito et al (2010) for Japanese exporters. More recent literature has also seen new evidence from disaggregated data, for instance, Goldberg and Tille (2009) with Canadian import transactions.…”

Section: A Fundamental Question Then Ismentioning

confidence: 99%

“…First, I assume that exporters take the prices and the currency denomination of foreign inputs as given. In fact, some exporters could negotiate with their trading partners for a desirable currency-a practice documented by Friberg and Wilander (2008) and Goldberg and Tille (2009). If exporters are allowed to decide on the currency in which their imported inputs are denominated, how would they choose, taking the currency denomination of exports as given?…”

Section: Theoretical Frameworkmentioning

confidence: 99%

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Imported inputs and invoicing currency choice: Theory and evidence from UK transaction data

Chung

2016

Journal of International Economics

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A signi…cant proportion of international trade is in intermediate goods. This paper considers theoretically and empirically how exporters' dependence on imported inputs a¤ects their choice of invoicing currency. The model predicts that exporters that depend more on foreign currency-denominated inputs are less likely to price in their home currency. I test this and other theoretical results using a novel dataset that covers UK trade transactions with non-EU countries. I …nd considerable support for the model's predictions. A 10 percentage point higher share of foreign currency-denominated inputs is associated with a 20 percentage point higher probability of pricing in the same foreign currency relative to the producer's currency.JEL Classi…cation: F1, F31, F41.

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Section: A Fundamental Question Then Ismentioning

confidence: 99%

Section: Theoretical Frameworkmentioning

confidence: 99%

Imported inputs and invoicing currency choice: Theory and evidence from UK transaction data

Chung

2016

Journal of International Economics

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“…First, many developing countries depend on commodity exports as their main source of revenue; since commodities are almost exclusively priced in the dollar, exporters in those countries prefer to use the dollar rather than local currencies in their transactions (Frankel and Saiki 2002). Even if they are exporting industrial goods because of the lower pricing power of exporters and the thin financial markets, they tend to price in the importers' currency (Goldberg and Tille 2009;Friberg and Wilander 2008). Finally, when EMEs trade with each other, the dollar is often used because of its role as the world's vehicle currency.…”

Section: Some Features Of Cross-border Bank Lending In Emerging Markementioning

confidence: 99%

Dealing with Quantitative Easing Spillovers in East Asia: The Role of Institutions and Macroprudential Policy

2016

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This paper explores the impact of advanced countries' quantitative easing on emerging market economies (EMEs) and how macroprudential policy and good governance play a role in preventing potential financial vulnerabilities. We used confidential locational bank statistics data from the Bank for International Settlements to examine whether quantitative easing has caused an appreciation of EMEs' currencies and how it has done so, and whether this has in turn boosted foreign-currency borrowing, thus making EMEs vulnerable to balance sheet and maturity mismatch problems. While focusing our analysis on East Asian economies, we compare them with Latin American economies, which were also major recipients of quantitative easing capital inflows. We found that government effectiveness plays an important role in curbing excessive borrowing when the exchange rate is overvalued.

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“…14 13 See Friberg and Wilander (2008) for example. This may be a consequence of firm risk aversion (Viaene and de Vries (1992)).…”

Section: Imperfect Informationmentioning

confidence: 99%

Foreign Currency Borrowing by Small Firms

2009

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We examine the firm-and country-level determinants of the currency denomination of small business loans. We first model the choice of loan currency in a framework which features a trade-off between lower cost of debt and the risk of firm-level distress costs, and also examines the impact of information asymmetry between banks and firms. When foreign currency funds come at a lower interest rate, all foreign currency earners as well as those local currency earners with high revenues and low distress costs choose foreign currency loans. When the banks have imperfect information on the currency and level of firms revenues, even more local earners switch to foreign currency loans, as they do not bear the full cost of the corresponding credit risk. We then test the implications of our model by using a 2005 survey with responses from 9,655 firms in 26 transition countries. The survey contains details on 3,105 recent bank loans. At the firm level, our findings suggest that firms with foreign currency income and assets are more likely to borrow in a foreign currency. In contrast, firm-level distress costs and financial transparency affect the currency denomination only weakly. At the country level, the interest rate advantages of foreign currency funds and the exchange rate volatility do not explain the foreign currency borrowing in our sample. However, foreign bank presence, weak corporate governance and the absence of capital controls encourage foreign currency borrowing. All in all, we cannot confirm that "carry-trade behavior" is the key driver of foreign currency borrowing by small firms in transition economies. Our results do, however, support the conjecture that banking-sector structures and institutions that aggravate information asymmetries may facilitate foreign currency borrowing.

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The currency denomination of exports — A questionnaire study

Cited by 100 publications

References 32 publications

Imported inputs and invoicing currency choice: Theory and evidence from UK transaction data

Imported inputs and invoicing currency choice: Theory and evidence from UK transaction data

Dealing with Quantitative Easing Spillovers in East Asia: The Role of Institutions and Macroprudential Policy

Foreign Currency Borrowing by Small Firms

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