This currency substitution study explores the extent of retail firm-level U.S. dollar acceptance in Canada and Mexico. Employing a stratified random sampling approach of retail business in the border region, results demonstrate that all Mexican firms (N = 300/300) and nearly all Canadian (N = 257/261) firms accept the U.S. dollar in retail transactions. Of greater interest is the difference between firms in the two countries in how acceptance of the U.S. dollar is operationalized. On average, U.S. dollar sales of Canadian border firms comprise just 3.4% of total sales whereas U.S. dollar sales of Mexican firms encompass 23.7% of total sales. Our results also indicate a stark contrast as to the effective exchange rate for U.S. dollar acceptance - Canadian firms typically charge a premium (2.1% on average) while 69.3% of Mexican firms transacted business at a discount (-0.8% on average). Additional analyses further refine the currency substitution distinctions between Canadian and Mexican firms in the sample including a logistical regression which reveals significant differences as to firm-level predictors of U.S. dollar acceptance (whether at a discount or premium).
|Journal||The International Trade Journal|
|State||Published - 2008|