On the design of invoicing practices in international trade
June 1992
Article
volume 3, issue 2 pp 133-142.
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We advance an explanation for the choice of the invoice currency of international trade contracts on the basis of strategic bargaining considerations. The choice of the invoice currency originates in a situation in which each trader takes into account the other party's bargaining power. The latter depends on the individual discount factor, whether one is the first or second proposer, and whether one is on the short or long side of the market. Along these lines we explain the Grassman bias for trade contracts to be invoiced in the exporter's currency.
Keywords
Automatically Extracted Terms
- exporter
- currency
- importer
- trade
- invoice
- bargaining
- market
- invoice currency
- party
- market considerations
- invoice parameter
- parameter
- proposer
- probability
- invoicing practices
- consideration
- commodity
- partner
- invoicing
- equilibrium
