U.S. Dollar Dominance and the Role of Local Currency Settlement Framework - Evidence from Thai Exports

Oct 13, 2026

This paper examines factors behind the persistence of dominant currency pricing and the effectiveness of de-dollarization policies in emerging market economies. Using a transaction-level customs dataset of Thailand from 2007–2024, it documents sustained dollar invoicing in Thai export transactions, alongside a gradual increase in baht invoicing. Dollar dominance is attributed to firm and industry characteristics, while the Local Currency Settlement Framework between Thailand and partner countries moderately reduces dollar reliance with heterogeneous effects across firms and industries. Findings also indicate that dollar-denominated liabilities do not affect invoicing choice.

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U.S. Dollar Dominance and the Role of Local Currency Settlement Framework: Evidence from Thai Exports* Mintrapan Chaeng-lum† Bank of Thailand Nuwat Nookhwun† Bank of Thailand Jettawat Pattararangrong† Bank of Thailand 15 May 2026 Abstract This paper examines factors behind the persistence of dominant currency pricing and the effectiveness of de-dollarization policies in the context of emerging market economies. Using a transaction-level customs dataset of Thailand spanning 2007–2024, we document the dominance of dollar invoicing in Thai export transactions, despite a gradual rise in baht invoicing. Such dollar dominance is largely explained by firm and industry characteristics, including imported input exposure, strategic complementarities and inertia in invoicing currency choice. Meanwhile, the introduction of the Local Currency Settlement Framework (LCSF) between Thailand and partner countries including Malaysia and Indonesia moderately reduces dollar reliance, with effects being heterogeneous across firms and industries. Notably, we find that dollar-denominated liabilities do not influence invoicing choice, suggesting some disconnection between operational and financial hedging. Key Words: Invoicing currency choice, dollar dominance, dollar-denominated debt, local currency settlement framework, firm-level trade, Thai exports JEL Code: F14, F3 *The paper is part of the SEACEN’s research project on “U.S. Dollar Dominance in Trade Invoicing and Cross-Border Investments in SEACEN Economies”. We thank the project manager, Hiro Ito, Nur Ain Shahrier and participant at the SEACEN interim workshop for their helpful comments. Views expressed in this paper are those of the authors and should not be attributed to the Bank of Thailand. †[Monetary Policy Department. Chaeng-lum: Mintrapan.c@gmail.com](Monetary Policy Department. Chaeng-lum: Mintrapan.c@gmail.com); Puey Ungphakorn Institute for Economic [Research. Nookhwun: NuwatN@bot.or.th](Research. Nookhwun: NuwatN@bot.or.th); Pattararangrong: [JettawaP@bot.or.th](JettawaP@bot.or.th) (Corresponding author). 1 Introduction Global trade is dominated by a few invoice currencies, notably US$ . This is especially the case for emerging market economies (EMEs), where the share of dollar invoicing among a country’s exports stands at 80% in Asia and almost 100% in Latin America (Boz et al., 2022; Gopinath et al., 2020) . The outsized role of the dollar has important implications on exchange rate passthrough to import and domestic prices as well as firm profitability, which becomes sensitive to dollar fluctuations at least in the short-run. While empirical work on endogenous currency choices has gained traction over the past two decades, most work is done in the context of advanced countries (Amiti et al., 2022; Chung, 2016; Shimizu et al., 2025) . Trade invoicing currency decisions of firms in EMEs deserve more attention not least because dollar is used more extensively. Given such dollar dominance, central banks in EMEs often have policy initiatives to promote the use of their own domestic currency or regional currencies toward invoicing trade transactions. A great example is the Local Currency Settlement Framework among certain ASEAN countries, the effectiveness of which has yet to be explored. In this paper, we aim to explore the invoice currency choices of trade in an EME, namely Thailand, by exploiting a detailed transaction-level Customs dataset spanning 2007–2024 . Specifically, we aim to answer two following research questions. First, what are the key characteristics and drivers of invoicing currency choices of Thai exports? We will examine the role of traditional drivers as emphasized in Amiti et al. (2022) and Crowley et al. (2020), including a firm’s exposure to imported inputs, its market share, strategic complementarities in invoicing currencies and prior experience in dollar invoicing. However, we also study an additional factor that can be relevant f

FAQs

What does the paper study about invoicing currencies in Thailand?

It studies why dollar invoicing persists in Thai export transactions and how firm and industry characteristics shape invoice currency choice.

How effective is the Local Currency Settlement Framework (LCSF) in reducing dollar reliance?

The introduction of the LCSF modestly reduces dollar reliance, but effects vary across firms and industries.

Does dollar-denominated debt influence invoicing currency choice?

The paper finds that dollar-denominated liabilities do not influence invoicing choice, suggesting some separation between operational and financial hedging decisions.

Oct 13, 2026

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