The purpose of this paper is to examine the choice of currency for Norwegian exporters of aquaculture products. This choice will affect prices in different markets as well as risk, factors that are increasingly important as the supply chain for aquaculture products are becoming more sophisticated and more transaction mechanisms are introduced. Since Norway is the world´s second largest seafood exporter, and the leading exporter of farmed salmon, Norwegian exporters are of special relevance to study.
Choice of invoicing currency is a topic that has gained attention in the international literature on international trade. If one assumes that an exporter is free to determine the invoicing currency, three different strategies are available. An exporter who is concerned with exchange rate risk would set the prices in the domestic currency. This is known as “producer currency pricing” (PCP). The prices can also be set in the importer’s currency, a “local currency pricing” strategy (LCP). This would be the case for an exporter who can exercise market power or conduct so-called “pricing-to-market”, but can also be due to other factors that do not imply oligopolistic behavior, such as currency convertibility. Finally, the exporter could set the price in a major “world” currency, a “vehicle currency pricing” strategy (VCP), which is typically the US dollar (USD), euro, or Japanese yen. A well-known insight from the literature of international trade is that trade in homogenous primary goods should be conducted in a single vehicle currency as market efficiency increases if prices are expressed in the same currency.
Looking into fish exporters’ currency choices we find some interesting patterns. First, the domestic currency (NOK) is more frequently found compared to studies from other countries. Vehicle currencies, as the dollar, are used, but in far from the same frequencies found for other homogenous products (metals and oil) and what is the case for exporters in other countries. We also compare currency choices from export of aquaculture products with products from traditional fisheries. In the last group vehicle currencies are much more used than what is the case for export of aquaculture products. We find that the most important factors explaining these features are the high degree of liquidity in the market for Norwegian currency as well as a high degree of maturity in the market for aquaculture products.