Does the Canadian Dollar Travel South? An Examination of Currency Substitution along the U.S.‐Canadian Border

This paper investigates currency substitution along the U.S.‐Canada border with specific reference to the use of the Canadian dollar in the United States. In our study sites of Bellingham, WA; Buffalo, NY; Burlington, VT; Houlton, ME; Minot, ND; Port Huron, MI; and Sault Ste. Marie, MI, we found that 70.1 percent of 364 sampled U.S. located retail establishments accepted the Canadian dollar during the study period of July 2003. Accepting firms did so at an average premium of 7.7 percent per transaction with a concomitant average increase in stores sales of 3.0 percent. The significant variables at the firm‐level in the decision to accept/reject the Canadian dollar are firm experience in the community; ownership model (local, regional, national or international); geographic location; cross‐border operations; and retail category.