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Dominant Currencies:How firms choose currency invoicing and why it matters


Time: 10:00 am-11:30 am, Mar. 4th, 2022

Platform: Zoom

Speaker: Oleg Itskhoki

(University of California, Los Angeles)

Link: https://us06web.zoom.us/j/81626164288?pwd=Zmp1VG41dXF0by9UZTBRVkxSbjJWZz09

Meeting ID: 816 2616 4288

Passcode: inse



We analyze how firms choose the currency of invoicing and the implications of this choice for exchange rate pass-through into export prices and quantities. Using a new dataset for Belgian firms, we find currency invoicing to be an active firm-level decision, shaped by the firm’s size, exposure to imported inputs, and the currency choices of its competitors. Our results show that the firm’s currency choice, in turn, has a direct causal impact on the exchange rate pass-through into prices and quantities. Moreover, the differential price response of similar firms that invoice in different currencies is large, persists beyond a one-year horizon, and gradually wanes in the long run. This results in allocative expenditure-switching effects on export quantities, which build up over time, suggesting a role for quantity adjustment frictions in addition to price stickiness. Our findings shed light on the mechanisms that make or break a dominant currency and the consequences it has for the international transmission of shocks.





Prof. Oleg Itskhoki is a Professor of Economics at University of California, Los Angeles. He is also a Research Associate at the National Bureau of Economic Research, a Research Affiliate at the Center for Economic Policy Research, and an Associate Editor at the American Economic Review. He was a participant of the 2009 Review of Economic Studies Tour, a Sloan Research Fellow in 2015-2017, and was on the IMF’s list of 25 economists under 45. His areas of interest include globalization and labor markets, and exchange rates and international relative prices. His work studies macroeconomic consequences of various frictions—in the labor market, in the financial market, in the product market, and in nominal price setting—in economies with micro-level heterogeneity, connecting theory with detailed micro-level data. His papers are published by leading academic journals including American Economic ReviewEconometricaQuarterly Journal of EconomicsJournal of Political Economy and Review of Economic Studies. He received a Ph.D. in Economics from Harvard University in 2009.