Exporter Price Response to Exchange Rate Changes

Henrik Barslund Fosse

Research output: Working paper › Research

Abstract

Firms exporting to foreign markets face a particular challenge: to price their exports in a foreign market when the exchange rate changes. This paper takes on pricing- to-market using a unique data set that covers rm level monthly trade at great detail. As opposed to annual trade ows, monthly trade ows bring us closer to the transaction level where rm decisions are actually made. I nd that the utilization of monthly data does add new information about the average level of pricing-to-market, and the di¤erences between long-run pricing-to-market and short-run pricing-to-market. Furthermore, I nd industry di¤erences in pricing-to-market in terms of the magnitude (zero to complete pricing-to-market) and the timing (when do rms changes prices), and that pricing-to-market is stronger on high-income markets. As discussed in detail in the paper, all results are in-line with predictions of several theoretical contributions to the litterature on pricing-to-market and exchange rate pass-through.
Firms exporting to foreign markets face a particular challenge: to price their exports in a foreign market when the exchange rate changes. This paper takes on pricing- to-market using a unique data set that covers rm level monthly trade at great detail. As opposed to annual trade ows, monthly trade ows bring us closer to the transaction level where rm decisions are actually made. I nd that the utilization of monthly data does add new information about the average level of pricing-to-market, and the di¤erences between long-run pricing-to-market and short-run pricing-to-market. Furthermore, I nd industry di¤erences in pricing-to-market in terms of the magnitude (zero to complete pricing-to-market) and the timing (when do rms changes prices), and that pricing-to-market is stronger on high-income markets. As discussed in detail in the paper, all results are in-line with predictions of several theoretical contributions to the litterature on pricing-to-market and exchange rate pass-through.
LanguageEnglish
Place of PublicationFrederiksberg
PublisherCentre for Economic and Business Research, Copenhagen Business School
Number of pages24
StatePublished - 2012

Keywords

  • Pricing-to-market
  • Heterogeneous Exporter
  • Monthly Firm Level Trade Data

Cite this

Fosse, H. B. (2012). Exporter Price Response to Exchange Rate Changes. Frederiksberg: Centre for Economic and Business Research, Copenhagen Business School.
Fosse, Henrik Barslund. / Exporter Price Response to Exchange Rate Changes. Frederiksberg : Centre for Economic and Business Research, Copenhagen Business School, 2012.
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Fosse, HB 2012 'Exporter Price Response to Exchange Rate Changes' Centre for Economic and Business Research, Copenhagen Business School, Frederiksberg.

Exporter Price Response to Exchange Rate Changes. / Fosse, Henrik Barslund.

Frederiksberg : Centre for Economic and Business Research, Copenhagen Business School, 2012.

Research output: Working paper › Research

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Fosse HB. Exporter Price Response to Exchange Rate Changes. Frederiksberg: Centre for Economic and Business Research, Copenhagen Business School. 2012.

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