Exchange rate pass-through and invoicing currency choice between fixed and floating exchange rate regimes: Evidence from Malawi’s transaction-level data

Montfaucon, Angella Faith; Sato, Kiyotaka; Shrestha, Nagendra; Parsons, Craig

doi:10.1016/j.eap.2021.09.006

Cited by 5 publications

(4 citation statements)

References 23 publications

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“…In order to conduct panel estimation with a monthly series, the first step is to identify a unique product in a month for which a single price and tariff rate can be applied from the transaction data, using programming tools. Our panel setup is closely linked to the data handling detailed in Devereux et al (2017) and Montfaucon et al (2021). However, they do not analyse any import taxes, and this is where our setup diverges.…”

Section: Methodsmentioning

confidence: 99%

“…Our first contribution is in constructing monthly trade prices and values data for trade between Malawi and other African countries, using transaction‐level data set of imports similar to Montfaucon et al (2021). The literature on intra‐African trade has focused mainly on policy issues or macroeconomic and trade policies using the gravity model.…”

Section: Introductionmentioning

confidence: 99%

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Effects of import taxes on intra‐African trade: New evidence from a case study of Malawi's imports

Chipeta

Montfaucon

2022

World Economy

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We investigate the effect of import duty, import excise and import value‐added taxes (VAT) on Malawi's import prices, values and volumes in trading with Africa. We find that import taxes increase import prices, with import VAT having the largest impact. Import duties lead to higher import values, but by a much smaller extent and import duties and VAT have a positive relationship with import quantities from COMESA while a negative one with SADC countries. In relation to AfCFTA, an increase in relative market access increases the probability of a product being from an African country, while high import duties decrease the probability of Malawian importers trading with other African countries. The presence of import VAT further reduce these odds. Zero tariffs in the AfCFTA may only increase intra‐African trade marginally. Other policies on market access and other import taxes need to be assessed, while accounting for potential fiscal implications.

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Section: Methodsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Effects of import taxes on intra‐African trade: New evidence from a case study of Malawi's imports

Chipeta

Montfaucon

2022

World Economy

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“…Instead, the vast majority of trade is invoiced in a small number of dominant, vehicle currencies (VCP), with the U.S. dollar playing an outsized role. It is therefore the share of these small number of currencies that overwhelmingly determine the level of exchange rate pass-through, even under various exchange rate regimes (Montfaucon et al, 2021). Higher pricing in the USD, leads to higher pass-through of the USD, and higher sensitivity to trade when there are fluctuations (Boz et al, 2022), with pass-through often higher when a vehicle currency is used (Devereux et al, 2017).…”

Section: Exchange Ratesmentioning

confidence: 99%

Trade Policy and Exporters' Resilience: Evidence from Indonesia

Calì¹,

Ghose²,

Montfaucon³

et al. 2022

Policy Research Working Papers

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The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

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“…Numerous other studies warrant citation:Casas et al (2017) andGopinath et al (2020) for Colombia;Hayakawa et al (2024) for Thailand;Chung (2016),Chen et al (2022), andCorsetti et al (2022) for the UK;Montfaucon et al (2021) for Malawi; andAmiti et al (2022) for Belgium.3 In addition to exchange rate risks, the OA method carries the risk of non-payment, whereas the CIA method carries the risk of nondelivery(Schmidt-Eisenlohr, 2013).…”

mentioning

confidence: 99%

Payment Method and Invoicing Currency: Evidence from Turkish Textile and Clothing Exports

Türkcan,

Yoshida,

Yoshimi

2024

Preprint

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This study examines how the payment method affects the choice of invoicing currency. Focusing on Turkish textile and clothing exports, it finds that exporters using the open account method, where payment is made after goods are received, prefer to invoice in their home currency (Turkish lira) to mitigate exchange rate risks associated with foreign currencies. This preference is more pronounced among small and medium-sized enterprises. We also find that the euro, the predominant foreign currency in our Turkish sample, is less likely to be used under the OA method. Additionally, the Turkish lira is more likely chosen as the invoicing currency when its value is higher, when exporting to fewer countries, or by less productive exporters. JEL Classification: F14 and L14

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Exchange rate pass-through and invoicing currency choice between fixed and floating exchange rate regimes: Evidence from Malawi’s transaction-level data

Cited by 5 publications

References 23 publications

Effects of import taxes on intra‐African trade: New evidence from a case study of Malawi's imports

Effects of import taxes on intra‐African trade: New evidence from a case study of Malawi's imports

Trade Policy and Exporters' Resilience: Evidence from Indonesia

Payment Method and Invoicing Currency: Evidence from Turkish Textile and Clothing Exports

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