Dollar Invoicing and the Heterogeneity of Exchange Rate Pass-Through
AbstractWe show empirically that the variation across country pairs in exchange rate pass-through and trade elasticity is meaningfully explained by the dollar's dominance as invoicing currency. We use a hierarchical Bayesian approach to directly and flexibly model pass-through heterogeneity conditional on the invoicing currency share. We estimate that the importer's country-level dollar invoicing share explains 15 percent of the overall variance across trading pairs in dollar exchange rate pass-through into bilateral prices.
CitationBoz, Emine, Gita Gopinath, and Mikkel Plagborg-Møller. 2019. "Dollar Invoicing and the Heterogeneity of Exchange Rate Pass-Through." AEA Papers and Proceedings, 109: 527-32. DOI: 10.1257/pandp.20191009
- E42 Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems
- F31 Foreign Exchange
- F33 International Monetary Arrangements and Institutions