The Federal Reserve Bank of New York works to promote sound and well-functioning financial systems and markets through its provision of industry and payment services, advancement of infrastructure reform in key markets and training and educational support to international institutions.
The Outreach & Education function engages, empowers and educates the public in the Second District. Our outreach mission furthers the Bank’s commitment to the region by listening to the communities we serve and developing programs, analysis and sponsored conferences and clinics to help meet their needs. Our education mission aims to advance public knowledge about the Federal Reserve System and its role in the economy.
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 (due, for instance, to the use of imported inputs) and macroeconomic volatility. We use a new, highly disaggregated data set to assess the roles of the various invoicing determinants. Our 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. We 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.