| Home > Research > Research Publications |
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| Research Update |
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| New Titles in the Staff
Reports Series |
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| Number 4, 2009 |
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| International |
| No. 400, October 2009 |
| The Determinants of International Flows of U.S. Currency |
| Rebecca Hellerstein and William Ryan |
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| This paper examines the determinants of cross-border flows of U.S. dollar banknotes, using a new panel data set of bilateral flows between the United States and 103 countries from 1990 to 2007. Hellerstein and Ryan show that a gravity model explains international flows of currency as well as it explains international flows of goods and financial assets. They find important roles for market size and transaction costs, consistent with the traditional gravity framework, as well as roles for financial depth, the behavior of the nominal exchange rate, the size of the informal sector, the amount of remittance credits, the degree of competition with the euro, and the history of macroeconomic instability over the previous generation. The study finds no role for official trade flows of goods. Its results thus confirm several hypotheses about the determinants of using a secondary currency. |
| No. 405, November 2009 |
| Micro, Macro, and Strategic Forces in International Trade Invoicing |
| Linda S. Goldberg and Cédric Tille |
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| The use of different currencies in the invoicing of international trade transactions plays a major role in the international transmission of economic fluctuations. Existing studies argue that an exporter’s invoicing choice reflects structural aspects of its industry, such as market share and the price sensitivity of demand, as well as the hedging of marginal costs (attributable, for instance, to the use of imported inputs) and macroeconomic volatility. Goldberg and Tille use a new, highly disaggregated data set to assess the roles of the various invoicing determinants. Their findings support the factors identified in the literature and document a new feature: a link between shipment size and invoicing. Specifically, larger transactions are more likely to be invoiced in the importer’s currency. The authors offer a theoretical explanation for the empirical link between transaction size and invoicing by allowing invoicing to be set through bargaining between exporters and importers, a feature absent from existing models despite its empirical relevance. |
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