Recent studies indicate the dominant role of the US dollar in invoicing merchandise exports and imports, despite the relatively low share of the US in bilateral trade. The dominant currency pricing paradigm implies muted export response to a currency depreciation, which weakens an economy’s external adjustment. In Asia, around 87% of the region’s merchandise good exports and around 77% of the region’s imports were invoiced in the US dollar based on most recent data, although the US accounted for only about 9% of the region’s merchandise exports and only about 5% of the region’s merchandise imports. In contrast, around 57% of exports and 48% of imports of other emerging and developing economies were invoiced in US dollar. This study aims to assess which factors significantly contribute to Asia’s high US dollar trade invoicing, compared to other regions.

JEL codes: F14, F31, F41