Invoicing and the Dynamics of Pricing-to-Market: Evidence from UK Export Prices around the Brexit Referendum

Giancarlo Corsetti, Meredith Crowley and Lu Han

No 13282, CEPR Discussion Papers from Centre for Economic Policy Research

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 rates; Pass through; Law of one price; Markup elasticity; Vehicle currency; Dominant currency; Firm level data (search for similar items in EconPapers)
JEL-codes: F31 F41 (search for similar items in EconPapers)
Date: 2022-01
New Economics Papers: this item is included in nep-int and nep-opm
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Citations: View citations in EconPapers (11)

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Related works:
Journal Article: Invoicing and the dynamics of pricing-to-market: Evidence from UK export prices around the Brexit referendum (2022)
Working Paper: Invoicing and the Dynamics of Pricing-to-market - Evidence from UK Export Prices around the Brexit Referendum (2018)
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