## c3-international-trade-classified-by-currency

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### Background — current standards, existing initiatives, and analytical relevance
- International standards (BPM6, 2008 SNA, 2010 IMTS) do not include currency composition of international trade in goods and services accounts; BPM6 recommends currency compilation for derivatives and debt claims and liabilities on/to nonresidents.
- Existing datasets and initiatives covering currency composition or related currency breakdowns:
  - Currency Composition of Official Foreign Exchange Reserves (COFER) — IMF-managed, quarterly; 149 reporting countries in December 2020.
  - Coordinated Portfolio Investment Survey (CPIS) — includes Currency breakdown of portfolio investment assets.
  - International Investment Position (IIP) currency composition — collected by the IMF as memorandum presentations.
  - World Bank Quarterly External Debt Statistics (QEDS) — external debt by currency.
  - Bank for International Settlements (BIS) Triennial Central Bank Survey — foreign exchange market data by currency since 1989; BIS locational banking statistics provide geographical and currency composition of banks' assets and liabilities.
- Aggregate scale of international trade (exports side, 2019):
  - IMF’s 2020 BOPSY dataset – World and Regional Aggregates: 2019 international transactions in goods and services = US$24.7 trillion, representing about 28.2 percent of global GDP.
- Ongoing compilation initiatives:
  - European Central Bank developing a database on trade in goods and services by currency; Eurostat collecting trade by invoicing currency data for Extrastat.
  - Multiple academic studies summarized in Annex II.2.
- Analytical importance:
  - Currency of invoicing influences firm-level profit maximization, business cycle correlations, and monetary policy transmission.
  - Literature findings: industry features and country size influence invoice currency; countries with more open capital accounts tend to invoice in euro or domestic currency and less in the U.S. dollar; vehicle currency invoicing affects exchange rate pass-through to import prices and trade volumes; invoicing exports in U.S. dollars can dampen export responses to exchange rate depreciation, especially short term.
- Stakeholders with interest:
  - Policymakers and academic researchers (external sector vulnerabilities, reserves adequacy, monetary unions, trade policy, exchange rate pass-through).
  - Analysts and foreign exchange market participants (market developments and FX forecasting).
  - IMF research and assessments (SDR currency basket composition, reserves adequacy, determination of "freely usable" currencies).

### Issues for discussion — scope, conceptual choices, and operational considerations
- Scope options for appending currency classification:
  - Append to goods and services accounts (current account) — aligns with change of ownership and rendering/consumption; totals equal goods and services accounts and link to product/service/partner breakdowns.
  - Append to corresponding financial account entries — ties classification to financial instruments but may include non-trade-related items.
- Goods versus services:
  - Options: start with goods-only template or introduce separate templates for goods and services on a voluntary basis.
  - Considerations:
    - Services heterogeneity and hybrid data sources may reduce services-by-currency quality relative to goods.
    - IMF’s 2020 BOPSY: world exports of services increased by 52 percent between 2008–2019, reaching US$6.1 trillion in 2019; services’ share of global exports rose from 20.2 percent to 24.6 percent over that period.
    - Services may follow distinct currency composition patterns.
- Currency concept — denomination versus settlement:
  - Currency of denomination (preferred): currency in which contractual value is fixed; aligns with BPM6 paragraph 3.98; known at or near change of ownership or service rendering; conceptually best for assessing terms of trade and exchange rate vulnerability.
  - Currency of settlement: currency used at payment; useful for reserves risk management and monitoring FX market flows; may differ from denomination and relate to corresponding financial flows rather than trade itself.
  - Practical concern: settlement-based statistics can dissociate trade and settlement, complicating compilation.
- Data sources and feasibility:
  - Invoices (customs declarations) closely related to currency of denomination and primary source in academic studies.
  - Alternative/complementary sources: surveys, International Transactions Reporting System (ITRS) settlement data, administrative data (VAT), banking records.
  - Compilers may need to modify source data or add collection forms; ITRS may provide settlement currency proxies.
- List of currencies and classification items:
  - First-level breakdown: domestic currency versus foreign currency.
  - Suggested reference set: SDR basket as starting point (pounds Sterling, Chinese yuan, euro, Japanese yen, U.S. dollar).
  - Additional foreign currencies may be reported voluntarily if important to reporting economy.
  - Template should include an unallocated item for allocation difficulties and transactions without specific currency (e.g., barter, in-kind transfers).
- Periodicity:
  - Balance analytical needs versus compilers’ capacity.
  - Quarterly aligns with ESS standards but may increase burden; annual reporting may reduce burden with limited loss of analytical value (example: Boz et al (2020) use annual invoicing data).

### Outcomes — recommendation summary
- Guidance Note recommendation:
  - Develop an encouraged voluntary data collection template that breaks down imports and exports of goods, or goods and services, by currency (template in Annex I).
- Rationale and key recommendations:
  - Provide important analytical value for analysts, policymakers, academic researchers, and FX market participants.
  - Align with existing international initiatives and facilitate cross-country comparison using SDR-based common set of currencies with country-specific additions and an unallocated buffer.
  - Prefer currency of denomination concept, with practical allowance for alternative data sources and proxies where invoice access is limited.
  - Recommend weighing quarterly versus annual periodicity; annual compilation identified as a feasible lower-burden option that preserves analytical usefulness.

### Proposed breakdown: append currency composition to goods and services totals
- Proposed approach:
  - Append currency breakdown onto total values of goods and services accounts (goods and services totals).
  - Three out of four authors agreed with this recommendation.
- Phased alternative suggested by one author:
  - Start with reporting currency composition of merchandise trade statistics partly adjusted.
  - Assess user needs and develop data sources for currency composition of all adjustment categories (reconciliation between IMTS and goods on a BOP basis).
  - Phased approach may create initial inconsistencies with BOP goods totals but could reduce compilation/respondent burden and allow higher reporting frequency.
- Dissenting positions:
  - One CATT member disagreed with main recommendation.
  - Two CATT members disagreed with appendage to totals.
  - One CATT member suggested a phased approach.
  - One CATT member disagreed with the proposed currency breakdown in the template.
- Currency concept:
  - All CATT members agreed on using currency of denomination.
- Source data and coverage:
  - Invoices proposed as main source for goods; settlement currency acceptable if denomination data unavailable or poor quality.
  - Practical issues: invoice-based data can be burdensome; mixed sources raise comparability and bilateral asymmetry issues but enhance coverage.
- Reporting template options and Committee preference:
  - Option 1: Currency composition for gross totals of imports and exports of goods only.
  - Option 2 (majority-supported): Currency composition for gross totals of imports and exports of goods and services; countries may opt to report goods-only if services data poor.
  - Option 3: More detailed currency breakdowns by BOP standard components of goods and services.
- Periodicity:
  - Annual periodicity proposed and unanimously agreed by CATT members.
  - Countries with advanced systems encouraged to report quarterly and/or monthly.
- List of currencies and reporting flexibility:
  - Majority supported domestic and foreign currencies with further breakdown of foreign currencies according to SDR basket.
  - Voluntary reporting of non-SDR currencies where important; inclusion of unallocated item recommended.
- Questions posed to Committee members:
  - Q1: Support development of a voluntary data collection template for international trade classified by currency?
  - Conditional follow-ups: Q2 (append to BOP goods and services?), Q3 (use currency of denomination?), Q4 (support Option 2?), Q5 (support annual collection?), Q6 (agree with proposed currency breakdown?).

### Annex I — Summary of proposed templates (high-level)
- Option 1: Currency Composition of International Trade Covering Goods
  - Yearly table: Goods — Credits and Debits; columns: Total, Domestic currency, Foreign currency, SDR basket currencies, U.S. dollar, Euro, Chinese yuan, Japanese yen, Pounds sterling, Other currencies, of which Currency A/B/C, Unallocated.
  - Note: Total equal to balance of payments goods account; report non-SDR currencies if important.
- Option 2: Currency Composition of International Trade Covering Goods and Services
  - Yearly table: Goods and Services — Credits and Debits for each; same currency breakdown as Option 1.
  - Note: Total equal to balance of payments goods and services account; report non-SDR currencies if important.
- Option 3: Currency Composition Covering Standard Components of Goods and Services
  - Detailed Credit and Debit tables by BOP components (Goods — General merchandise on BOP basis, Net exports of goods under merchanting, Nonmonetary gold; Services — 12 service categories).
  - Currency columns: Total, Domestic currency, Foreign currencies, Unallocated, SDR currencies, Other currencies, U.S. dollar, Euro, Chinese yuan, Japan yen, Pounds sterling, Currency A/B/C.
  - Note: Total equal to balance of payments goods and services account; report non-SDR currencies if important.

### Annex II — Supplementary information: studies, existing data, compilation methods, and empirical comparisons
- Referenced documents include IMF Staff Discussion Note 2020/05, IMF Working Paper 2020/126, and foundational studies by Goldberg and Tille (2008), Gopinath (2015), Ito and Chinn (2014), Kamps (2006), and statistical manuals (BPM6, 2008 SNA, 2010 IMTS).
- Key study findings and datasets (selected):
  - Boz et al. (2020), sample: 102 countries — dataset mainly invoicing-based; findings: "The U.S. dollar has a globally dominant role in invoicing."; "Both the U.S. dollar and the euro have been increasingly used for invoicing..."; invoicing in U.S. dollars (euros) associated with greater USD (EUR) exchange rate pass-through to import prices.
  - Ito and Chinn (2014), sample: 50 countries — invoicing data; findings: countries with more developed financial markets tend to invoice less in the U.S. dollar; countries with more open capital accounts tend to invoice in euro or domestic currency.
  - Goldberg and Tille (2008), sample: 24 countries — invoicing data; findings: determinants include industry features and country size; "coalescing" effect explains dollar dominance.
  - Kamps (2006), sample: 42 countries — EU data; highlights micro and macro implications of invoice currency choice.
- Existing currency-distribution statistics:
  - BIS Triennial Central Bank Survey (2019) — currency distribution of OTC foreign exchange turnover (net-net basis, percentage shares of average daily turnover, April):
    - USD: 2019 Share 88,3 Rank 1.
    - EUR: 2019 Share 32,3 Rank 2.
    - JPY: 2019 Share 16,8 Rank 3.
    - GBP: 2019 Share 12,8 Rank 4.
    - AUD: 2019 Share 6,8 Rank 5.
    - CHF: 2019 Share 5,0 Rank 7.
    - CNY: 2019 Share 4,3 Rank 8.
    - HKD: 2019 Share 3,5 Rank 9.
    - OTH: 2019 Share 2,2.
    - Total: 200,0 (two currencies involved in each transaction).
  - COFER (Q3 2020): "60 percent of international reserves are in U.S. dollar, around 21 percent are in euro, 6 percent in Japanese yen, followed by 4 percent in Pounds sterling."
- Country examples of currency-composition positions (selected excerpts, positions and years preserved as presented):
  - Brazil — Debt Claims on/to Nonresidents by Currency Composition (Position: September 2020), US$ million (selected rows):
    - Total: 35 942 14 156 59 631 12 597 47 033 30 592 105 356.
    - Domestic currency: 135 1 062 435 627 1 834 3 031.
    - Foreign currency total: 35 942 14 020 58 569 12 162 46 407 28 759 102 325.
    - U.S. dollar: 35 942 10 965 52 319 11 814 40 505 27 006 91 267.
    - Euro: 1 726 4 340 76 4 264 1 484 7 550.
    - Reserve assets: 356 606.
    - In SDR basket: 356 601.
    - Not in SDR basket: 4.
  - Brazil — Debt Liabilities on/to Nonresidents by Currency Composition (Position: September 2020), US$ million (selected rows):
    - Total: 4 085 145 651 115 553 112 142 14 901 97 241 244 131 621 561.
    - Domestic currency: - 68 149 550 12 008 554 11 454 21 182 101 889.
    - Foreign currency total: 4 085 77 502 115 003 78 876 14 347 64 529 79 921 355 387.
    - U.S. dollar: 21 72 176 113 089 67 029 11 994 55 035 59 010 311 324.
    - Euro: - 3 327 637 8 611 540 8 072 16 394 28 969.
  - Republic of Moldova — Structure of Gross External Debt by Currencies and Institutional Sectors at Period-end (US$ million) (selected cells):
    - General government — Euro 2019 659,39; 2018 544,33; 2017 518,31.
    - General government — U.S. dollar 2019 69,1; 2018 170,97; 2017 170,85.
    - Central Bank — Special Drawing Rights 2019 180,51; 2018 217,8; 2017 264,29.
    - Deposit-taking corporations — Euro 2019 198,14; U.S. dollar 2019 91,63.
    - Other sectors and direct investment intercompany lending rows with values preserved as presented.
- Compilation methods and data-source tradeoffs:
  - Direct reporting (surveys): accurate, more common for services, but expensive and burdensome.
  - Invoice currencies (customs declarations): administrative, generally accurate and low burden for goods; coverage differences from BOP (CIF/FOB) and do not cover services.
  - Settlement currency (ITRS): covers goods and services and country distribution, but limited detail on goods/service types and methodological differences with BOP.
  - Recommendation from compilers: treat compilation of international trade classified by currency composition further in the update of the BPM6 Compilation Guide.
- Exploratory comparisons of invoice versus settlement data (selected empirical findings):
  - Republic of Moldova:
    - Large differences between customs declaration (invoice) and ITRS settlement data for goods; differences in currency shares for goods exports often exceed 10 percentage points in some years.
    - Example: Exports of goods — Euro: 2017 Invoice 51 vs Settlements 40, Difference 11; 2018 Invoice 54 vs Settlements 41, Difference 13.
    - Example: Exports of goods — U.S. dollar: 2017 Invoice 46 vs Settlements 57, Difference -11; 2018 Invoice 43 vs Settlements 53, Difference -10.
  - Brazil (exports of goods, 2019, USD million):
    - Total: Invoice 225 383; Settlement 192 087.
    - Domestic currency: Invoice 4 858; Settlement 4.
    - Foreign currency: Invoice 220 120; Settlement 189 392.
    - SDR basket currencies: Invoice 220 086; Settlement 189 240.
    - U.S. dollar: Invoice 211 118; Settlement 180 702.
    - Unallocated: Invoice 405; Settlement 2 691.
    - Finding: "The results... show a very large share of U.S. dollar and a better coverage for the invoice source."
  - Morocco (differences calculated as currency of denomination (%) - currency of settlement (%)):
    - Euro: 2019 Export 6,6% / 2019 Import 1,3% / 2020 Export 5,7% / 2020 Import -1,1%.
    - U.S. dollar: 2019 Export -8,6% / 2019 Import -3,3% / 2020 Export -6,9% / 2020 Import -1,3%.
    - Finding: "The exercise reveals an average difference of 7 percent for the two main currencies from export side while the currency structure seems to be closer for imports."

*Source: CATT review and proposed templates for a voluntary collection of currency composition of international trade, International Monetary Fund.*

### SECTION I: THE ISSUE

### c3-international-trade-classified-by-currency - SECTION I: THE ISSUE

### Background — current standards, existing initiatives, and analytical relevance
- None of the international standards (the IMF’s Balance of Payments and International Investment Position Manual, sixth edition (BPM6), the System of National Accounts 2008 (2008 SNA), and the International Merchandise Trade Statistics 2010 (2010 IMTS)) include the currency composition of international trade in goods and services accounts; BPM6 recommends compilation by currency composition for derivatives and debt claims and liabilities on/to nonresidents.
- Existing international initiatives and datasets that cover currency composition of positions:
  - Currency Composition of Official Foreign Exchange Reserves (COFER) — IMF-managed, quarterly positions by currency; in December 2020 there were 149 reporting countries.
  - Coordinated Portfolio Investment Survey (CPIS) — IMF-managed, includes a table for Currency breakdown of portfolio investment assets.
  - International Investment Position (IIP) currency composition — collected by the IMF as memorandum presentations to support analysis of currency mismatches and liquidity risks; recommended by the G-20 Data Gaps Initiative.
  - World Bank Quarterly External Debt Statistics (QEDS) — includes two tables with a breakdown of external debt by currency.
  - Bank for International Settlements (BIS) Triennial Central Bank Survey — foreign exchange market data by currency since 1989 (includes all foreign exchange operations, no separate identification for transactions related to international trade in goods and services); BIS locational banking statistics provide geographical and currency composition of banks' assets and liabilities.
- Aggregate scale of international trade (exports side, 2019):
  - According to the IMF’s 2020 BOPSY dataset – World and Regional Aggregates, 2019 international transactions in goods and services accounted for US$24.7 trillion, representing about 28.2 percent of global GDP.
- Ongoing data collection and research initiatives:
  - European Central Bank (ECB) developing a database on trade in goods and services by currency; Eurostat collecting trade by invoicing currency data for Extrastat.
  - Multiple academic studies summarized in Annex II.2 addressing cross-country datasets for trade classified by currency.
- Analytical importance:
  - Currency of invoicing affects firm-level profit maximization, business cycle correlations, and monetary policy transmission.
  - Findings from literature cited: industry features and country size influence invoice currency; countries with more open capital accounts tend to invoice in euro or domestic currency and less in the U.S. dollar; vehicle currency invoicing affects exchange rate pass-through to import prices and trade volumes; invoicing exports in U.S. dollars can dampen export responses to exchange rate depreciation, especially short term.
- Stakeholders with interest:
  - Policymakers and academic researchers (external sector vulnerabilities, reserves adequacy, monetary unions, trade policy, exchange rate pass-through).
  - Analysts and foreign exchange market participants (market developments and FX forecasting).
  - IMF research and assessments (SDR currency basket composition, reserves adequacy, determination of "freely usable" currencies).

### Issues for discussion — scope and conceptual choices
- Scope: two principal options for where to append currency classification:
  - Append to goods and services accounts (current account) — aligns with change of ownership (goods) and rendering/consumption (services); totals would equal the goods and services accounts, facilitating interpretation and linkage with real-side trade breakdowns (product, service type, partner).
  - Append to corresponding financial account entries — ties classification to financial instruments (trade credit and advances, currency and deposits, loans), but financial entries may include non-trade-related items except for trade credit and advances.
- Goods versus services:
  - Options: begin with goods-only template or introduce separate templates for goods and services on a voluntary basis.
  - Considerations:
    - Heterogeneity of services and hybrid data sources/models may reduce quality of services-by-currency statistics relative to goods.
    - Excluding services omits a relevant current account item: IMF’s 2020 BOPSY shows world exports of services increased by 52 percent between 2008–2019, reaching US$6.1 trillion in 2019; services’ share of global exports rose from 20.2 percent to 24.6 percent over that period.
    - Services may follow distinct currency composition patterns, justifying separate breakdowns.
- Additional breakdowns:
  - Adding product-level (goods) or type-of-service breakdowns would enrich information but increase compilation burden.
  - The proposal considers adding an additional breakdown of the 12 categories of services by currency as a reporting option.
- Currency concept — denomination versus settlement:
  - Currency of denomination: currency in which value of flows/positions is fixed per contract; aligns with BPM6 paragraph 3.98; allows distinction of transaction values and holding gains/losses; known at or near time of change of ownership or service rendering/consumption; conceptually best for currency composition of international trade because it influences terms of trade and exchange rate vulnerability assessment.
  - Currency of settlement: may differ from denomination; a currency conversion occurs at settlement related to liquidity and potential FX drains; useful for strategic asset/liability allocation, reserves risk management, and monitoring FX market flows; settlement currency relates to corresponding financial flows, not trade itself.
  - Practical concern: using settlement currency could dissociate trade and settlement, complicating compilation, especially for long-term assets/liabilities.
- Data sources and feasibility:
  - Invoices are closely related to currency of denomination and have been primary source in academic studies; BPM6 Compilation Guide paragraph A7.43 identifies invoices as capturing currency of denomination of financial instruments or invoices of goods and services.
  - Customs declarations may provide invoice currency for many countries relying on customs for goods statistics.
  - Access to invoice data may be challenging for agencies compiling balance of payments; GN G.1/C.11 testing of trade invoicing is underway (testing and final GN expected availability referenced in source).
  - Alternative and complementary sources: surveys, International Transactions Reporting System (ITRS) settlement data, administrative data (including VAT systems), banking records; combination of sources may provide the best proxy for currency of denomination.
  - Compilers may need to modify existing source data or add collection forms and surveys to capture currency breakdown; ITRS may contain settlement currency information useful for proxies.
- List of currencies and classification items:
  - First-level breakdown: domestic currency versus foreign currency to assess the role of domestic currency in trade and external vulnerabilities.
  - Suggested reference set: use the SDR basket as starting point for specifying most-used currencies worldwide; SDR basket currently composed of pounds Sterling, Chinese yuan, euro, Japanese yen and the U.S. dollar.
  - Additional foreign currencies outside SDR basket may be explicitly reported depending on importance to reporting economies (e.g., regional currencies such as Indian rupees for neighboring countries).
  - Template should include an unallocated item to address allocation difficulties and cases where transactions lack a specific currency (e.g., barter trade, in-kind transfers); unallocated item aligns with analogous items in BPM6 A.9.I and QEDS tables and can buffer estimation/modeling uncertainties (e.g., travel and FISIM).
- Periodicity:
  - Consider balance between analytical needs and compilers’ capacity.
  - Quarterly reporting aligns with current ESS reporting standards, but currency composition of international trade is not expected to change frequently.
  - Annual reporting may reduce compilation burden without greatly reducing analytical value; example: Boz et al (2020) use annual frequency for invoicing currency and capture trends even across major historical events.

### Outcomes — recommendation summary
- The Guidance Note proposes development of an encouraged data collection template that introduces a breakdown of imports and exports of goods, or goods and services, by currency as part of balance of payments reporting (template presented in Annex I).
- Rationale for recommendation:
  - Provides important analytical value for analysts, policymakers, academic researchers, and FX market participants.
  - Aligns with existing international initiatives and would facilitate cross-country comparison using a common set of currencies (SDR-based) with capacity for country-specific additions and an unallocated buffer.
  - Recommends currency of denomination as the preferred conceptual basis, with practical allowance for alternative data sources and proxies where invoice access is limited.
  - Recommends weighing quarterly versus annual periodicity against compilers’ capacity, with annual compilation identified as a feasible lower-burden option that preserves analytical usefulness.

*IMF Guidance Note — SECTION I: THE ISSUE.*

### 21.      Proposed breakdown: The proposal is for the currency breakdown to be appended onto

### Proposed breakdown: Currency composition of international trade appended to goods and services totals

### Proposed approach and rationale
- The proposal is for the currency breakdown to be appended onto the total values of the goods and services accounts.
- Three out of four authors agreed with this recommendation.
- Alternative phased approach suggested by one author:
  - Start with reporting the currency composition of merchandise trade statistics partly adjusted.
  - Then assess user needs and develop data sources to compile the currency composition of all adjustment categories, as proposed in the reconciliation between IMTS and goods on a BOP basis (see BPM6 Table 10.2).
  - A phased approach could generate initial inconsistency between the currency breakdown and the totals of goods in balance of payments, but could provide higher reporting frequency and less compilation and respondent burden.
  - The same author suggested continuing consultations as part of the update of IMTS and Manual on Statistics of International Trade in Services (MSITS) to promote reconciliation among different statistical approaches in methodologies.
- Dissenting positions noted:
  - One CATT member disagreed with the main recommendation.
  - Two CATT members disagreed with the recommendation regarding appendage to totals.
  - One CATT member also suggested a phased approach.
  - One CATT member disagreed with the proposed currency breakdown in the template.

### Currency concept to be used
- The currency of denomination is proposed to be used to develop statistics of international trade by currency.
- Advantages cited for currency of denomination:
  - More aligned with the ESS principles, including the change of ownership, time of recording and valuation.
  - Allows measurement of risk exposures arising from exchange rate changes.
- All CATT members agreed with using the currency of denomination.

### Source data and coverage considerations
- Invoices are proposed to be the main data source for compiling the currency composition of international trade in goods.
- Currency of settlement could be acceptable for reporting if data on currency of denomination are not available or are not of sufficient quality.
- Practical issues:
  - For some countries, developing and using invoice-based data sources can be burdensome.
  - Even where invoice data are accessible, not all transactions are likely to be covered.
  - Using a mix of invoice and settlement data sources could raise issues of comparability and bilateral asymmetries, but could enhance coverage and increase the number of reporting economies.

### Reporting template options and Committee preference
- The drafting team considered three options for the reporting templates; a majority of CATT members supported Option 2.
- Option 1:
  - Report the currency composition only for the gross totals of the imports and exports of international trade in goods.
  - Rationale: Breakdown of trade in services by currency would have more source data issues that could reduce data quality.
- Option 2 (majority-supported):
  - Report the currency composition for the gross totals of the imports and exports of both goods and services.
  - Countries may still choose to report only the goods breakdown if services data are of poor quality or not available.
- Option 3:
  - Report more detailed currency breakdowns according to the balance of payments standard components of goods and services.

### Periodicity
- The proposal is for annual periodicity for reporting the currency breakdown of international trade; CATT members unanimously agreed.
- A quarterly reporting proposal was considered but may unnecessarily increase compilation burden.
- Countries with advanced collection systems that can provide higher frequency (quarterly and/or monthly) are strongly encouraged to do so.
- This periodicity is consistent with the periodicity proposed by the GN “C.2 Goods, Services, and Investment Income Accounts by Enterprise Characteristics” template.

### List of currencies and reporting flexibility
- The majority of CATT members agreed with having domestic and foreign currencies, with a further breakdown of the latter according to the SDR basket.
- Depending on the importance of non-SDR basket currencies to the international trade of each economy, these currencies could also be reported on a voluntary basis.
- An unallocated item is also proposed.

### Questions for Committee discussion (as posed)
- Q1: Do Committee members support the need to develop a voluntary data collection template for international trade classified by currency?
- If Q1 = “Yes”, follow-up:
  - Q2: Do Committee members agree that international trade classified by currency should be appended onto the balance of payments’ goods and services account?
  - Q3: Do Committee members agree that the classification used to compile international trade by currency should be based on the currency of denomination?
  - Q4: Do Committee members support Option 2 for the reporting template of international trade classified by currency?
  - Q5: Do Committee members support an annual collection of international trade classified by currency?
  - Q6: Do Committee members agree with the proposed currency breakdown to be included in the template?

### Annex I: Summary of proposed templates (high-level)
- Option 1: Currency Composition of International Trade Covering Goods
  - Yearly table: Goods — Credits and Debits; breakdown by Total, Domestic currency, Foreign currency, SDR basket currencies, U.S. dollar, Euro, Chinese yuan, Japanese yen, Pounds sterling, Other currencies, of which Currency A/B/C, Unallocated.
  - Note: Total should be equal to balance of payments goods account. Report non-SDR currencies if deemed important.
- Option 2: Currency Composition of International Trade Covering Goods and Services
  - Yearly table: Goods and Services — Credits and Debits for each; same currency breakdown as Option 1.
  - Note: Total should be equal to balance of payments goods and services account. Report non-SDR currencies if deemed important.
- Option 3: Currency Composition Covering Standard Components of Goods and Services
  - Detailed Credit and Debit tables by component (Total Goods and Services; Goods — General merchandise on a BOP basis, Net exports of goods under merchanting, Nonmonetary gold; Services — detailed service categories including Manufacturing services on physical inputs owned by others, Maintenance and repair services n.i.e., Transport, Travel, Construction, Insurance and pension services, Financial services, Charges for the use of intellectual property n.i.e., Telecommunications, computer, and information services, Other business services, Personal, cultural, and recreational services, Government goods and services n.i.e.).
  - Currency columns: Total, Domestic currency, Foreign currencies (Unallocated, SDR currencies, Other currencies, U.S. dollar, Euro, Chinese yuan, Japan yen, Pounds sterling, Currency A/B/C).
  - Note: Total should be equal to the balance of payments goods and services account. Report non-SDR currencies if deemed important.

*Source: CATT review and proposed templates for a voluntary collection of currency composition of international trade, International Monetary Fund.*

### Annex II. Supplementary Information

### Annex II. Supplementary Information

### II.1 Referenced documents
- Lists studies and manuals referenced for currency composition of international trade, including:
  - Adler, G., Casas, C., Cubeddu, L., Gopinath, G., Li, N., Meleshchuk, S., Buitron, C., Puy, D., Timmer, Y. Dominant Currencies and External Adjustment. IMF Staff Discussion Note 2020/05.
  - Boz, E., Casas, C., Georgiadis, G., Gopinath, G., Le Mezo, H., Mehl, A., Nguyen, T., 2020. Patterns in Invoicing Currency in Global Trade. IMF Working Paper 2020/126.
  - Goldberg, L., Tille, C., 2008. Vehicle-currency Use in International Trade. Journal of International Economics 76, 177–192.
  - Gopinath, G., 2015. The International Price System. NBER Working Paper 21646.
  - IMF, 2009. Balance of Payments and International Investment Position Manual, sixth edition.
  - Ito, H., Chinn, M., 2014. The Rise of the “Redback” and the People’s Republic of China’s Capital Account Liberalization: An Empirical Analysis of the Determinants of Invoicing Currencies. ADBI Working Paper 473.
  - Kamps, A., 2006. The Euro as Invoicing Currency in International Trade. ECB Working Paper 665.
  - United Nations, 2008. The System of National Accounts.
  - United Nations, 2010. International Merchandise Trade and Statistics.

### II.2 Studies – datasets related to currency composition on international trade
- Table 1: Studies related to currency composition on international trade of goods — key study findings:
  - Boz et. al (2020), sample: 102 countries.
    - Dataset provides information on the share of trade invoiced primarily in dollars and in euros, and in many cases domestic currency.
    - Currency concept/source: mostly invoicing; settlement only for countries for which information on invoicing is not available.
    - Findings:
      - "The U.S. dollar has a globally dominant role in invoicing."
      - "Both the U.S. dollar and the euro have been increasingly used for invoicing, even as the share of global trade accounted for by the United States and the Euro Area has declined."
      - "The euro is used as a vehicle currency in parts of Africa, and some European countries have seen significant shifts toward euro invoicing."
      - "Countries invoicing more in U.S. dollars (euros) tend to experience greater U.S. dollar (euro) exchange rate pass-through to their import prices."
  - Ito and Chinn (2014), sample: 50 countries.
    - Updates and expands datasets by Goldberg and Tille (2008) and Kamps (2006).
    - Currency concept/source: invoicing.
    - Findings:
      - "Countries with more developed financial markets tend to invoice less in the U.S. dollar and countries with more open capital accounts tend to invoice in either the euro or their domestic currency."
  - Goldberg and Tille (2008), sample: 24 countries.
    - Data availability varies across countries; for some, invoicing vs settlement ambiguous.
    - Currency concept/source: invoicing.
    - Findings:
      - "Determinants of invoice currency choice are industry features and country size, with some role for foreign exchange bid–ask spreads."
      - "The 'coalescing' effect helps to explain the dominance of the dollar."
      - "The U.S. dollar is important in the invoicing of world trade both because the United States is an important consumer and producer in world markets, and various countries peg their currencies to the dollar."
  - Kamps (2006), sample: 42 countries.
    - Data for EU countries collected by the European System of Central Banks.
    - Currency concept/source: invoicing.
    - Findings:
      - "The currency in which the international trade is invoiced has micro and macroeconomic implications."
      - "At the firm level, profit maximization of firms engaged in international trade is affected by their choice of currency. At the macroeconomic level, it affects business cycle correlations between countries and the transmission mechanism of monetary policy."

### II.3 Data already existent for currency composition
- BIS Triennial Central Bank Survey of Foreign Exchange and OTC Derivatives Markets in 2019 — currency distribution of OTC foreign exchange turnover (net-net basis, percentage shares of average daily turnover in April). Selected shares and ranks by year:
  - USD: 2004 Share 88,0 Rank 1; 2007 Share 85,6 Rank 1; 2010 Share 84,9 Rank 1; 2013 Share 87,0 Rank 1; 2016 Share 87,6 Rank 1; 2019 Share 88,3 Rank 1.
  - EUR: 2004 Share 37,4 Rank 2; 2007 Share 37,0 Rank 2; 2010 Share 39,0 Rank 2; 2013 Share 33,4 Rank 2; 2016 Share 31,4 Rank 2; 2019 Share 32,3 Rank 2.
  - JPY: 2004 Share 20,8 Rank 3; 2007 Share 17,2 Rank 3; 2010 Share 19,0 Rank 3; 2013 Share 23,0 Rank 3; 2016 Share 21,6 Rank 3; 2019 Share 16,8 Rank 3.
  - GBP: 2004 Share 16,5 Rank 4; 2007 Share 14,9 Rank 4; 2010 Share 12,9 Rank 4; 2013 Share 11,8 Rank 4; 2016 Share 12,8 Rank 4; 2019 Share 12,8 Rank 4.
  - AUD: 2004 Share 6,0 Rank 6; 2007 Share 6,6 Rank 6; 2010 Share 7,6 Rank 5; 2013 Share 8,6 Rank 5; 2016 Share 6,9 Rank 5; 2019 Share 6,8 Rank 5.
  - CHF: 2004 Share 6,0 Rank 5; 2007 Share 6,8 Rank 5; 2010 Share 6,3 Rank 6; 2013 Share 5,2 Rank 6; 2016 Share 4,8 Rank 7; 2019 Share 5,0 Rank 7.
  - CNY: 2004 Share 0,1 Rank 29; 2007 Share 0,5 Rank 20; 2010 Share 0,9 Rank 17; 2013 Share 2,2 Rank 9; 2016 Share 4,0 Rank 8; 2019 Share 4,3 Rank 8.
  - HKD: 2004 Share 1,8 Rank 9; 2007 Share 2,7 Rank 8; 2010 Share 2,4 Rank 8; 2013 Share 1,4 Rank 13; 2016 Share 1,7 Rank 13; 2019 Share 3,5 Rank 9.
  - OTH: 2004 Share 6,6; 2007 Share 7,7; 2010 Share 4,7; 2013 Share 1,7; 2016 Share 2,2; 2019 Share 2,2.
  - Total: 200,0 for each survey year (note: because two currencies involved in each transaction, sum of percentage shares totals 200%).
  - Footnotes:
    - Adjusted for local and cross-border inter-dealer double-counting (ie “net-net” basis).
    - Turnover for years prior to 2013 may be underestimated owing to incomplete reporting of offshore trading; methodological changes in 2013 ensured more complete coverage of activity in EME and other currencies.
    - Turnover for some currencies may be underestimated owing to incomplete reporting of offshore trading.

- Currency Composition of Official Foreign Exchange Reserves (COFER), as of the third quarter of 2020:
  - "60 percent of international reserves are in U.S. dollar, around 21 percent are in euro, 6 percent in Japanese yen, followed by 4 percent in Pounds sterling."

- Brazil — Debt Claims on/to Nonresidents by Currency Composition (Position: September 2020), US$ million (selected rows):
  - Total: 35 942 14 156 59 631 12 597 47 033 30 592 105 356.
  - Domestic currency: 135 1 062 435 627 1 834 3 031.
  - Foreign currency total: 35 942 14 020 58 569 12 162 46 407 28 759 102 325.
  - U.S. dollar: 35 942 10 965 52 319 11 814 40 505 27 006 91 267.
  - Euro: 1 726 4 340 76 4 264 1 484 7 550.
  - Reserve assets: 356 606.
  - In SDR basket: 356 601.
  - Not in SDR basket: 4.
  - Of which one year or less — Foreign currency: 35 33 13 127 29 955 3 581 26 374 20 929 64 079.
  - Of which one year or less — U.S. dollar: 35 33 10 337 26 503 3 514 22 989 19 769 56 678.

- Brazil — Debt Liabilities on/to Nonresidents by Currency Composition (Position: September 2020), US$ million (selected rows):
  - Total: 4 085 145 651 115 553 112 142 14 901 97 241 244 131 621 561.
  - Domestic currency: - 68 149 550 12 008 554 11 454 21 182 101 889.
  - Foreign currency total: 4 085 77 502 115 003 78 876 14 347 64 529 79 921 355 387.
  - U.S. dollar: 21 72 176 113 089 67 029 11 994 55 035 59 010 311 324.
  - Euro: - 3 327 637 8 611 540 8 072 16 394 28 969.
  - Goods: - - - 21 258 0 21 258 143 028 164 286.
  - Of which one year or less — Foreign currency: 21 7 62 585 10 021 4 420 5 601 11 163 83 797.
  - Of which one year or less — U.S. dollar: 21 0 61 847 6 998 2 583 4 415 6 323 75 190.

- Republic of Moldova — Structure of Gross External Debt by Currencies and Institutional Sectors at Period-end (US$ million) (selected cells):
  - General government:
    - Euro 2019 659,39; 2018 544,33; 2017 518,31.
    - U.S. dollar 2019 69,1; 2018 170,97; 2017 170,85.
    - Special Drawing Rights 2019 931; 2018 932,05; 2017 973,85.
    - Other 2019 58,47; 2018 59,01; 2017 59,54.
  - Central Bank — Special Drawing Rights 2019 180,51; 2018 217,8; 2017 264,29.
  - Deposit-taking corporations:
    - Euro 2019 198,14; 2018 188,42; 2017 185,98.
    - U.S. dollar 2019 91,63; 2018 124,33; 2017 157,91.
    - Other 2019 17,20; 2018 66,69; 2017 79,25.
  - Other sectors:
    - Euro 2019 1554,24; 2018 1437,26; 2017 703,2.
    - U.S. dollar 2019 1641,49; 2018 1648,94; 2017 1895,48.
    - Other 2019 111,86; 2018 83,58; 2017 70,3.
  - Direct investment: intercompany lending:
    - Euro 2019 661,56; 2018 613,69; 2017 496,92.
    - U.S. dollar 2019 1162,61; 2018 1163,67; 2017 1185,13.
    - Other 2019 78,88; 2018 70,91; 2017 72,63.

### II.4 Compilation methods and data sources
- Main data sources for compiling currency composition of international trade in goods and services:
  - Direct reporting:
    - Accurate; used more for services than goods.
    - Surveys are limited for central banks, mostly implemented by statistical offices.
    - Surveys are expensive, increase reporters’ burden, and only a limited number of currencies can be included.
  - Invoice currencies (customs declarations):
    - Administrative data; generally accurate and impose little burden.
    - Provide information on countries and groups of goods.
    - Coverage can differ from balance of payments due to coverage issues and CIF/FOB valuation differences (see Annex E of 2010 IMTS).
    - Do not cover services.
  - Settlement currency (ITRS):
    - Available from ITRS; covers goods and services and country distribution.
    - Limited details on goods or types of services may be available.
    - Coverage can differ from balance of payments methodology (discussion in paragraphs 11–13).
- Recommendation from compilers:
  - "Considering the statistical adjustments needed for goods, including those done to obtain from IMTS data the balance of payments goods and other coverage adjustments, the inherent burden on using surveys and the methodological issues of using settlement data, the compilation of international trade classified by currency composition should be further treated in the update of the BPM6 Compilation Guide."

- Table 6: Data sources availability for currency composition on international trade — availability by country and data presentation (selected):
  - Brazil:
    - Goods/BoP Monthly: Invoice, Settlement.
    - Goods/IMTS Monthly: Invoice Monthly.
    - Services/BOP Monthly: Settlement, Survey.
  - Moldova:
    - Goods/IMTS Monthly: Invoice Monthly.
    - Other coverage of goods: Monthly Settlement.
    - Services/BOP Monthly: Monthly Settlement.
  - Morocco:
    - Goods/IMTS Monthly: Invoice Monthly.
    - Other coverage of goods: Monthly Settlement.
    - Services/BOP Monthly: Monthly Settlement.

### II.5 Comparing invoice data and settlement data
- General acknowledgment:
  - Figures presented are exploratory, elaborated for testing exercise, and include calculations based on assumptions where detailed data were not available.
- Exploratory exercise — Republic of Moldova:
  - Finding: "The Republic of Moldova has compared data from custom declaration (invoice) with ITRS and found quite big differences."
  - For goods exports the difference of currency shares is higher than 10 percentage points, and the amounts are not comparable for both imports and exports.
  - Table 7: Currency distribution, invoice versus settlements, share in respective totals (%). Selected comparisons (Invoice vs Settlements vs Difference (p. p.)):
    - Exports of goods:
      - Euro: 2016 Invoice 47 vs Settlements 41, Difference 6; 2017 Invoice 51 vs Settlements 40, Difference 11; 2018 Invoice 54 vs Settlements 41, Difference 13; 2019 Invoice 56 vs Settlements 53, Difference 3.
      - U.S. dollar: 2016 Invoice 50 vs Settlements 55, Difference -5; 2017 Invoice 46 vs Settlements 57, Difference -11; 2018 Invoice 43 vs Settlements 53, Difference -10; 2019 Invoice 41 vs Settlements 41, Difference 0.
      - Russian ruble: Invoice 2 each year vs Settlements 2 each year, Difference 0.
      - Other: Invoice 1 each year vs Settlements 1/4/4, Differences 0/0/-3/-3.
    - Imports of goods:
      - Euro: 2016 Invoice 46 vs Settlements 43, Difference 3; 2017 Invoice 47 vs Settlements 43, Difference 4; 2018 Invoice 47 vs Settlements 43, Difference 4; 2019 Invoice 48 vs Settlements 46, Difference 2.
      - U.S. dollar: 2016 Invoice 48 vs Settlements 52, Difference -4; 2017 Invoice 49 vs Settlements 52, Difference -3; 2018 Invoice 49 vs Settlements 52, Difference -3; 2019 Invoice 46 vs Settlements 48, Difference -2.
      - Russian ruble: Invoice 4/3/3/3 vs Settlements 5/4/4/3, Differences -1/-1/-1/0.
      - Other: Invoice 1/1/1/2 vs Settlements 1/1/1/2, Differences 0.
  - Methodological notes:
    - Invoice – IMTS data (Customs). Excluded: (1) goods in kind, (2) goods involved in construction projects, (3) different types of transactions supplementary to the main transaction (exchange in goods under guarantee), (4) goods included in international aid programs (or grants), (5) processing, (6) other goods from governmental programs (NP). No other BOP adjustments were included (e.g. no CIF-FOB, no merchanting, etc.).
    - Settlements – ITRS. Excluded: (1) e-trade, (2) payments in cash. Included: (1) proc. in ports.

- Exploratory exercise — Brazil:
  - Brazil compared invoice data (Customs registers) and settlement data (ITRS) for exports of goods in 2019.
  - Table 8: Brazil currency composition on international trade of goods (Invoice x Settlement), USD million, Year 2019, Exports of goods:
    - Total: Invoice 225 383; Settlement 192 087.
    - Domestic currency: Invoice 4 858; Settlement 4.
    - Foreign currency: Invoice 220 120; Settlement 189 392.
    - SDR basket currencies: Invoice 220 086; Settlement 189 240.
    - British pound: Invoice 694; Settlement 592.
    - Chinese renminbi: Invoice -; Settlement 1.
    - Euro: Invoice 8 159; Settlement 7 751.
    - Japanese yen: Invoice 116; Settlement 193.
    - U.S. dollar: Invoice 211 118; Settlement 180 702.
    - Other currencies: Invoice 34; Settlement 152.
    - Unallocated: Invoice 405; Settlement 2 691.
  - Finding: "The results... show a very large share of U.S. dollar and a better coverage for the invoice source."

- Exploratory exercise — Morocco:
  - Morocco compared customs declarations and settlements (ITRS) for 2019 and 2020; table shows differences for USD and EUR (difference calculated as currency of denomination (%) - currency of settlement (%)):
    - Table 9: Differences in Estimates (Currency: 2019 Export / 2019 Import / 2020 Export / 2020 Import)
      - Euro: 6,6% / 1,3% / 5,7% / -1,1%.
      - U.S. dollar: -8,6% / -3,3% / -6,9% / -1,3%.
  - Finding: "The exercise reveals an average difference of 7 percent for the two main currencies from export side while the currency structure seems to be closer for imports."

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_Source: https://www.imf.org/-/media/files/data/statistics/bpm6/catt/c3-international-trade-classified-by-currency.pdf_