Invoicing and the dynamics of pricing-to-market: Evidence from UK export prices around the Brexit referendum

Corsetti, Giancarlo, Crowley, Meredith and Han, Lu ORCID: 0000-0002-5316-1209 (2022) Invoicing and the dynamics of pricing-to-market: Evidence from UK export prices around the Brexit referendum. JOURNAL OF INTERNATIONAL ECONOMICS, 135. p. 103570.

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Official URL: http://dx.doi.org/10.1016/j.jinteco.2022.103570

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.

Item Type:	Article
Additional Information:	Source info: CEPR Discussion Paper No. DP13282
Uncontrolled Keywords:	Exchange rate, Pass through, Markup elasticity, Vehicle currency, Dominant currency, Firm level data
Divisions:	Faculty of Humanities and Social Sciences > School of Management
Depositing User:	Symplectic Admin
Date Deposited:	13 Jan 2022 16:21
Last Modified:	14 Jul 2023 01:30
DOI:	10.1016/j.jinteco.2022.103570
Related URLs:	Author Publisher
URI:	https://livrepository.liverpool.ac.uk/id/eprint/3146196