Amiti, MaryItskhoki, OlegKonings, Jozef2023-03-292023-03-292022Amiti, M., Itskhoki, O., & Konings, J. (2022). Dominant Currencies: How Firms Choose Currency Invoicing and Why it Matters. Quarterly Journal of Economics, 137(3), 1435–1493. https://doi.org/10.1093/qje/qjac004http://nur.nu.edu.kz/handle/123456789/7003We 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 data set 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 a firm’s currency choice, in turn, has a direct causal effect 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.enAttribution-NonCommercial-ShareAlike 3.0 United StatesType of access: Open AccessE31 - Price LevelInflationDeflationF31Foreign ExchangeF41Open Economy MacroeconomicsArticle