Factors influencing the choice of the invoicing currency in international trade: Panel data analysis for 55 countries





invoicing currency of trade, dominant currency paradigm, dollar, export, inflation, exchange rate


Research background: Most transactions in world trade are invoiced in several international currencies. The changes in the distribution of the great economic powers and the strengthening of the position of developing countries make it necessary to consider the factors determining the choice of trade invoicing currency and to assess the prospects of the dollar as an invoicing currency and the possibility of strengthening the position of developing countries' currencies in this function.

Purpose of the article: The aim of the paper is to assess the factors influencing the choice of invoicing currency for international trade in 2000?2019.

Methods: The analysis of factors influencing the choice of international trade invoicing currency is based on panel data modelling. The study is conducted for a group of 55 countries. It is assumed that the following variables may influence the currency position in the trade invoicing function: the share of the issuer's country in the bilateral trade, inflation and exchange rate.

Findings & value added: The analysis showed that despite the decreasing share of the United States in world trade, the U.S. dollar remains the most important export invoicing currency. The main factors influencing the dollar's dominance are the U.S. share of countries' exports, inflation in developing countries, and the exchange rate in advanced economies. The great significance of trade share as a determinant of the position of the trade invoicing currency is an important indication of the strengthening position of developing country currencies, particularly the Chinese yuan. The obtained results confirm, with the use of more complete data, the validity of the dominant currency paradigm and enrich the still underdeveloped analysis in the area of international macroeconomics using panel data analysis.


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How to Cite

Twarowska-Mól, K. (2023). Factors influencing the choice of the invoicing currency in international trade: Panel data analysis for 55 countries. Equilibrium. Quarterly Journal of Economics and Economic Policy, 18(1), 153–183. https://doi.org/10.24136/eq.2023.005