Invoicing and the Dynamics of Pricing-to-market: Evidence from UK Export Prices around the Brexit Referendum
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Authors
Corsetti, G.
Crowley, M. A.
Han, L.
Publication Date
2018-10-17Series
Cambridge Working Papers in Economics
Cambridge-INET Working Paper Series
Publisher
Faculty of Economics, University of Cambridge
Type
Working Paper
Previous Version(s)
Metadata
Show full item recordCitation
Corsetti, G., Crowley, M. A., & Han, L. (2018). Invoicing and the Dynamics of Pricing-to-market: Evidence from UK Export Prices around the Brexit Referendum. https://doi.org/10.17863/CAM.79758
Abstract
We provide micro-econometric evidence that, following the large and persistent sterling depreciation after the Brexit referendum, on impact, exchange rate pass-through (ERPT) was complete for transactions invoiced in producer currency and low for sales invoiced either in a vehicle or in the destination market currency. Yet these differences strikingly narrowed within six quarters. A weaker currency did not translate into a persistent gain in price competitiveness for UK exports. At a granular level we find that UK exporters invoice in multiple currencies ̶ even when shipping a product to the same destination ̶ and switch currencies over time. Remarkably, we fail to detect significant changes in the relative shares of invoicing currencies in response to the Brexit shock. Last but not least, we find that UK firms price-to-market, i.e., adjust markups to bilateral exchange rate and CPI movements, only when they invoice sales in the destination-market currency.
Keywords
exchange rate, pass through, markup elasticity, vehicle currency, dominant currency, firm level data
Identifiers
CWPE1860, C-INET1815
This record's DOI: https://doi.org/10.17863/CAM.79758
This record's URL: https://www.repository.cam.ac.uk/handle/1810/332312
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