The currency denomination of trade has been shown in many recent contributions to have far-reaching effects on different macroeconomic phenomena, such as inflation and the international transmission of nominal shocks. In this work, we apply a novel index of bargaining power, which incorporates the network dimension of trade and brings fresh evidence as to the relevance of network-related features (and implied bargaining power) in the choice of invoicing currency, which has received relatively little attention in the empirical literature, so far. By using a highly disaggregated, almost transaction level, data set of Italian imports and exports, we contribute to the existing empirical literature by documenting a very significant impact of trade network asymmetries, captured by our adjusted index of market share, on the choice of an invoice currency.
Network-adjusted market share and the currency denomination of trade / Arioldi, Davide; Ventura, Luigi; David Witte, Mark. - In: WORLD ECONOMY. - ISSN 1467-9701. - 45:(2022), pp. 2560-2592. [10.1111/twec.13239]
Network-adjusted market share and the currency denomination of trade
Luigi Ventura
;
2022
Abstract
The currency denomination of trade has been shown in many recent contributions to have far-reaching effects on different macroeconomic phenomena, such as inflation and the international transmission of nominal shocks. In this work, we apply a novel index of bargaining power, which incorporates the network dimension of trade and brings fresh evidence as to the relevance of network-related features (and implied bargaining power) in the choice of invoicing currency, which has received relatively little attention in the empirical literature, so far. By using a highly disaggregated, almost transaction level, data set of Italian imports and exports, we contribute to the existing empirical literature by documenting a very significant impact of trade network asymmetries, captured by our adjusted index of market share, on the choice of an invoice currency.File | Dimensione | Formato | |
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