GDL

Journal from gdlhub / 2017-08-14 11:52:53
Oleh : Philippe Bacchetta, Eric van Wincoop, ELSEVIER (phbacchetta@szgerzensee.ch (P. Bacchetta)8 vanwincoop@virginia.edu (E. van Wincoop).)
Dibuat : 2010-06-24, dengan 1 file

Keyword : Theory, currency, denomination,international, trade

The currency denomination of international trade has significant macroeconomic and policy


implications. In this paper we solve for the optimal invoicing choice by integrating this


microeconomic decision at the level of the firm into a general equilibrium open economy model.


Strategic interactions between firms play a critical role. We find that the less competition firms face


in foreign markets, as reflected in market share and product differentiation, the more likely they will


price in their own currency. We also show that when a set of countries forms a monetary union, the


new currency is likely to be used more extensively in trade than the sum of the currencies it replaces.

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