Abstract
The Yen : a billing currency ? This study deals with the following question : how may one estimate the potential demand for a given foreign currency by firms ? A model is proposed for doing this by examining the relative share in external trade of transactions denominated in the concerned foreign currency. The problem of foreign-currency demand is of particular relevance for the yen. This is because the yen plays a relatively minor role for invoicing purposes although it is rather widely held as a reserve currency, for instance in the South-East Asia region. Instead, firms appear to often select the US dollar, notably for their transactions with Japanese counterparts. The results derived from the proposed model permit to investigate the effects of general market conditions, as well as the effects of the depth and liquidity of the local foreign exchange market. This is based on a simulation exercise whereby average foreign exchange transaction costs are aligned on a chosen international reference. Directions for future research should include the examination of the impact of monetary co-ordination between countries in the South East Asia region, if one would take into account strategic interactions between economies with respect to the choice of a reference invoicing currency.
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