Dominant currency pricing in international trade of services
We analyze, for the first time, how firms choose the currency in which they price transactions in international trade of services and investigate, using direct evidence, whether the US dollar (USD) plays a dominant role in services trade. Drawing on a new granular dataset on extra-European Union exports of Portuguese firms broken down by currency, we show that currency choices in services trade are active firm-level decisions. Firms that are larger and rely more on inputs priced in foreign currencies are less likely to use the domestic currency to export services.